A decomposition of nominal value added growth over multiple sectors of an economy into explanatory factors is presented. The explanatory factors over a single sector are changes in the efficiency of the sector, growth of primary inputs, changes in sectoral output and input prices, technical progress and returns to scale. In order to implement the decomposition for a sector, an estimate of the
... [Show full abstract] sector's cost constrained value added function for the two periods under consideration is required, which is taken to be the free disposal hull of past observations. The problems associated with aggregating over sectors are also considered. The methodology is illustrated using U.S. data for two sectors over the years 1960-2014. Keywords Measurement of output, input and productivity, value added functions, revenue functions, variable profit functions, duality theory, economic price and quantity indexes, technical progress, total factor productivity, revenue efficiency, aggregation over sectors.
