averages over the current year and the prior year. Only the accounting approach using actual cost share data is applied in calculating TFPG, because the translog production function cannot be econometrically estimated due to too few observations and hence lack of degrees of freedom. presents the results for this approach. If the economic activities obey a translog Table 8 production function and the technological progress is Hicks neutral, then the entire economy would have an average 4% annual productivity growth for the period from 2000 to 2008. Only four sectors, namely mining and quarrying (#3), electricity, gas and water supply (#5), real estate (#12), and activities of Party (#17), experience decreases in total factor productivity on average over this time period. The rates of decline exceed 1% for the latter two sectors. Service sectors tend to have relatively high productivity growth rates, and several of the service sectors show more than 6% productivity growth. The productivity in the manufacturing sector grows at 3% annually on average, 2% lower than the agriculture and forestry sector. As shown in the second column of TFP growth rates derived from a translog Table 8, production function are almost identical to those based on a Cobb-Douglas production function using the accounting approach, indicating that translog production does not offer a significant improvement over Cobb-Douglas production function in estimating TFPG. The input cost shares in Vietnam do not vary greatly over time for most economic sectors. These results calls into question the adequacy of a translog production function, if it is parameterized as in Young’s method. [Insert about here] Table 8 4.2. CES production function The CES production function has been a challenge for researchers studying growth accounting. Diamond and McFadden (1965) proposed the that “Impossibility Theorem”, stating there is no way of identifying the elasticity of substitution if technological progress is biased. For the following years, the CES function has been consistently avoided in most work on growth accounting, with some exceptions of attempts to challenge the impossibility. Sato (1970) and recently Cantore et al. (2009) touched on this issue. Even though neither Sato nor Cantore et al.
averages over the current year and the prior year. Only the accounting approach using actual cost share data is applied in calculating TFPG, because the translog production function cannot be econometrically estimated due to too few observations and hence lack of degrees of freedom. Table 8 presents the results for this approach. If the economic activities obey a translog production function and the technological progress is Hicks neutral, then the entire economy would have an average 4% annual productivity growth for the period from 2000 to 2008. Only four sectors, namely mining and quarrying (#3), electricity, gas and water supply (#5), real estate (#12), and activities of Party (#17), experience decreases in total factor productivity on average over this time period. The rates of decline exceed 1% for the latter two sectors. Service sectors tend to have relatively high productivity growth rates, and several of the service sectors show more than 6% productivity growth. The productivity in the manufacturing sector grows at 3% annually on average, 2% lower than the agriculture and forestry sector. As shown in the second column of Table 8, TFP growth rates derived from a translog production function are almost identical to those based on a Cobb-Douglas production function using the accounting approach, indicating that translog production does not offer a significant improvement over Cobb-Douglas production function in estimating TFPG. The input cost shares in Vietnam do not vary greatly over time for most economic sectors. These results calls into question the adequacy of a translog production function, if it is parameterized as in Young’s method. [Insert Table 8 about here] 4.2. CES production function The CES production function has been a challenge for researchers studying growth accounting. Diamond and McFadden (1965) proposed the “Impossibility Theorem”, stating that there is no way of identifying the elasticity of substitution if technological progress is biased. For the following years, the CES function has been consistently avoided in most work on growth accounting, with some exceptions of attempts to challenge the impossibility. Sato (1970) and recently Cantore et al. (2009) touched on this issue. Even though neither Sato nor Cantore et al.