TFP growth is estimated as residual output growth unexplained by use of capital and labor.
A is a combination of influences this analysis cannot disentangle.
A captures net effect of all errors and omissions in the other data

Answers

source and contains both potential under- and over-estimates. TFP growth consists of the difference between the growth of actual output and the growth that would be expected, given the growth of capital and labor inputs. A is the error term in the TFP growth equation and represents the unexplained output growth due to factors that cannot be explained by the data sources, such as technological changes or other advances in production. A also captures any errors or omissions in the data sources, so it could mean an under- or over-estimation of TFP growth if the data sources are incomplete or inaccurate.

Answered by Richard Alvarado

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