Imperfect competition and total factor productivity growth

This article examines the role of imperfect competition in determining total factor productivity growth (TFPG) by bringing together a New Empirical Industrial Organization (NEIO) model and the TFPG model of Good, Nadiri and Sickles ( 1999). Application of the integrated model to 1973 - 1992 data from 29 food processing industries revealed that, overall, changes in markups, economies of scale, and demand growth contributed positively to TFPG while the disembodied technical change was a negative contributor. Furthermore, the factors underlying the TFPG estimates are interactive and their net effects are starkly different from the conventional Solow ( 1957) residual TFPG measures, underscoring the need to account for imperfect competition, returns to scale, and demand growth in analyses of this type.