The Dynamics of Productivity Change: A Review of the Bottom-Up Approach

Abstract

This paper considers the relation between (total factor) productivity measures for lower level production units and aggregates thereof such as industries, sectors, or entire economies. In particular, this paper contains a review of the so-called bottom-up approach, which takes an ensemble of individual production units, be it industries or enterprises, as the fundamental frame of reference. At the level of industries the various forms of shift-share analysis are reviewed. At the level of enterprises the additional features that must be taken into account are entry (birth) and exit (death) of production units.