Methods of measuring industry total factor productivity within an input-output framework

This paper reconsiders the methods of measuring industry total factor productivity. The method offered by the honourable authors Ronald E. Miller and Peter D. Blair in their relevant book “Input-output analysis. Foundations and extensions. Second Edition. − Cambridge University Press, 2013” (14.2.1 Total Factor Productivity, pages 670-673) will be carefully tested. And it will be proved that the concept of the r ate of total factor productivity growth offered in this book is inconsistent. With this, also decomposition of the change in total output of industry as “portion of change accounted for by using old technology to meet new input needs” plus “portion of change accounted for by using new technology to meet old input needs” is unsubstantial. The author realizes his serious liability for such categorical assertion about failure in the book present ed under the famous “Cambridge University” brand and that is the reason why he bestows the authority upon the scientific conference to pass the sentence about correctness o f his conclusions. In the second part of the present paper the original method of industry total factor productivity benchmarking within an input-output framework is offered. This method is grounded on the well-known Data Envelopment Analysis (DAE) using DAE modification by Jaunzems (2007). The main idea of this method is to compare the input-output capability of one and the same industry during one and the same time period in different countries. Thanks to the World Input-Output Database (WIOD) with its unified structured statistical information it is easy to carry out this method practically. Comparison of Latvia’s agriculture industries A01, A02, A03 Input-Output converting relative efficiency with proper industries in the Baltic States and Finland (2000, 2014) gives original economic results never met before.