Total factor productivity and relative prices: the case of Italy

Abstract

In his seminal work, Fontela (1989) set up the distributional rule of productivity gain in the input–output context (total factor productivity surplus, TFPS). Garau (1996) proposed an extension, to identify a measure of surplus, called purchasing power transfer (PPT). This measure is given by the productivity gains and market surplus generated by the extra-profit conditions derived from the rental positions detained by agents. Such a decomposition is useful because it provides information about the degree of non–competitiveness in different markets. In this paper, we compute and explain Fontela's (1989) TFPS by comparing it with Garau's (1996) PPT for Italy over 2009–2014.