Factor productivity and technical change

This paper deals with (i) decomposing total factor productivity growth into input-specific components, (ii) measuring input-specific productivity/efficiency growth, and (iii) testing several neutrality hypotheses in technical change. These issues are addressed in a general framework without assuming any functional form on the underlying production technology, and without imposing any structure on the behaviour of input productivity/efficiency growth. Using NBER panel data on 450 U.S. manufacturing industries for the period 1959-1992, it is found that technical change can be characterized by neither Hicks, Harrod, nor Solow neutral form. It is also found that productivity of capital has increased, on average by 6.5%, whereas those of labour and material declined by 5.10% and 0.4%, respectively.