A1 Refereed original research article in a scientific journal
Can Omitted Carbon Abatement Explain Productivity Stagnation?
Authors: Dai, Sheng; Kuosmanen, Timo; Zhou, Xun
Publisher: Wiley
Publishing place: HOBOKEN
Publication year: 2025
Journal: Review of Income and Wealth
Journal name in source: Review of Income and Wealth
Journal acronym: REV INCOME WEALTH
Article number: e70012
Volume: 71
Issue: 2
Number of pages: 14
ISSN: 0034-6586
eISSN: 1475-4991
DOI: https://doi.org/10.1111/roiw.70012
Web address : https://doi.org/10.1111/roiw.70012
Self-archived copy’s web address: https://research.utu.fi/converis/portal/detail/Publication/491635259
Explaining the secular stagnation of productivity growth is a widely recognized challenge to economists and policymakers. One potentially important explanation without much attention concerns the ongoing low-carbon transition. This paper explores whether considering greenhouse gas emissions can explain productivity stagnation in OECD countries. We propose a quantile shadow-price Fisher index to gauge green total factor productivity (TFP) based on the newly developed penalized convex quantile regression approach. The quantile shadow-price Fisher index requires neither the real price data nor an ad hoc choice of quantiles and allows the quantiles to move in the inter-period sample. An empirical application to 38 OECD countries during 1990-2019 demonstrates that the measured productivity growth is considerably higher when the GHG emissions are accounted for. For countries that have reduced GHG emissions most actively, the average green TFP growth rate could double the conventional TFP growth. The impacts of ignoring human capital and different representations of fixed capital on green TFP growth are also discussed explicitly.
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Funding information in the publication:
Sheng Dai gratefully acknowledges financial support from the OP Group Research Foundation [grant no. 20230008] and the Turku University Foundation [grant no. 081520].
