A note on modeling aggregate productivity growth: The importance of imperfect markets

Models of aggregate productivity growth linked to sectoral models of produc tion typically assume that product and factor markets are perfectly competi tive. The perfect markets assumption allows intermediate goods to be viewed as internal, offsetting transfers. This paper relaxes the conventional per fect markets assumption. The: alternatives of basing aggregate models of pr oductivity growth on value-added versus delivery-to-final-demand frameworks are analyzed. The import;ml finding is that if imperfect markets exist, th en the value-added and tilt: delivery-to-final-demand models generate ident ical measures of aggregate productivity growth only under very restrictive assumptions; moreover, a simple variant of imperfect competition cannot rec oncile these productivity measures.