| Total factor productivity (TFP) is a very important concept in macroeconomics. It helps to analyze the source of economy growth and it is also an important basis for the government to formulate long-term sustainable policy of economy growth. Therefore, the estimation of total factor productivity has a very important meaning to economy development.There are many ways to estimate TFP. Generally speaking, these methods can be divided into two kinds. The first kind is based on strict economic theory and mathematical derivation; the other kind is based on pure econometrics estimation. This paper uses Solow residual method to estimate total factor productivity which is also advised to developed countries by OECD.When using Solow residual method to estimate TFP, the most controversial focus is the capital input data. We use the method mentioned in the book which was written by OECD published in 2001,《Measuring Capital—Measurement of Capital Stocks, Consumption of Fixed Capital and Capital Services》to measure the capital service. The method was named the comprehensive Perpetual Inventory Method (PIM).The article includes the following seven sections.The first section describes the background and significance of the major topics and it also points that estimating total factor productivity is of great meaning.The second part is mainly about the present research situation and the related literature review of TFP and its theoretical basis. The present research of TFP is divided into two parts:one part is the research of TFP abroad; the other part is the study of total factor productivity in our country. The part of literature review is based on different estimation methods. The studies of domestic scholars were collated and classification review. At the last of this part, it introduces theoretical basis of TFP and the measuring method this article adopted and the reasons why we adopted it.The third part introduces the method of measuring capital service—PIM and its underlying logical framework. The basic data of output and labor input is readily available, but the only thing which is complex is the calculation of capital investment. Therefore, this section mainly describes the logical framework of PIM which was used to calculate the data of capital investment. It introduces several concepts including service life, age-efficiency profile, age-price profile, mortality patterns and index calculation. And then it describes the inner meaning and logic between these concepts.The fourth component is about the selection and processing of data. The data of output and labor input is from the China Statistical Yearbook published in every year. The data for calculating capital input is from《Data of Gross Domestic Product of China (1952-2004)》The fifth part is the estimation results and analysis about the results of TFP. The conclusion is that China's economy growth is based on both factor-input and TFP although TFP has a lower contribution than factor to economy growth.In sixth part, we give several relevant proposals mainly on how to change China's economy growth mode. We hope that these proposals can contribute to the improvement of total factor productivity. We also hope it can promote the transformation of China's economy growth mode and optimize the economy structure and make economy growth to be sustainable.The last part is a summary. It introduces the deficiencies of the paper as well as the parts which can be continuously improved.Anyway, the focus of the paper is the measurement of capital input which was ultimately used to calculate the total factor productivity. The method which was used to calculate capital input was named the comprehensive Perpetual Inventory Method. This method was raised by OECD in 2001 in the manual《Measuring Capital—Measurement of Capital Stocks, Consumption of Fixed Capital and Capital Services》.So this manual is an important reference. The method is very useful to the estimation of TFP. |
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