Create generalized Tornquist index for use in ces calibration routine

davidrpugh / numerical-methods

Graduate level course on numerical methods for economists

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Create generalized Tornquist index for use in ces calibration routine #11

Closed davidrpugh closed 10 years ago

davidrpugh commented 10 years ago

PWT notes on how productivity data are computed. See also the wikipedia page on Tornquist indices. Seems like the I just need to replace alphas with elasticity of output with respect to capital?

davidrpugh commented 10 years ago

Not sure this is necessary. From PWT docs it would seem that the Tornquist index they are currently using is already taking into account variation in capital shares. Issue seems to be that they measure TFP and in Solow/Ramsey models productivity/technology is labor augmenting. With Cobb-Douglas the transformation is simple. For general CES it seems less clear...

davidrpugh commented 10 years ago

Am now convinced that constructing a generalized Tornquist index is unnecessary. The TFP index constructed by PWT is already taking into account variation in capital shares across time and space. There is no need to impose the additional structure on capital shares implied by the CES form in order to estimate TFP.