exceed value added as measured in the SNA. We therefore normalize the returns to factors to sum to 1 after the disentangling of resource rents and profits has been carried out.<sup>5</sup> Another wrinkle in the calculation is that, because data on the number of people self-employed are lacking in many countries, the growth rate of labor inputs used in our calculation of TFP growth is based on the number of people in formal employment, which may not be a good assumption in many developing countries.

# _Fixed capital_

Turning to fixed capital, the _Wealth of Nations_ database uses capital stock estimates from the Penn World Table, built on the Perpetual Inventory Model, converted to constant 2014 US dollars.<sup>6</sup> To reach the final value, however, the underlying stock of capital at constant local prices and currency units (a measure of volume) is first converted to current international dollars at purchasing power parities (PPPs), then to current US dollars at market prices, then finally to constant 2014 US dollars. The various conversions involving prices and exchange rates lead inevitably to volatility in the final estimates of fixed capital. To avoid this volatility, we use the PWT figures for the volume measure – stock of capital at constant local prices – in our TFP estimation.

One final issue arises, however. The PWT methodology measures the total capital stock, both public and private. As a result of SNA conventions, however, public sector fixed capital is assumed to have zero profits. As a consequence, when measuring the contribution of fixed capital to GDP growth, we weight the growth rate of total fixed capital (g� in the second formula) by the returns to capital measured in the SNA (s� in the second formula), which are returns on productive capital. This approach introduces a potential bias to the extent that public sector fixed capital may grow at a rate different from productive fixed capital (that is, g� may have two components, one for productive fixed capital and another for public sector fixed capital). We currently have no independent measure of public sector fixed capital, but there is recent work on this at the IMF (IMF 2017).

# _Comparison with OECD estimates of TFP_

We have compared the results of measuring TFP growth using the above methodology with the OECD results published in OECD (2016) for specific countries.<sup>7</sup> In some cases these estimates are similar, in most cases they are not. The reasons for the disparity are many: OECD weights fixed capital at the user cost of capital, rather than surplus less resource rents; OECD has a more precise measure of labor input, based on hours worked; and the OECD adjustment for natural capital is based on an earlier and more limited version of the Wealth of Nations database. As a result, we do not publish the comparisons in this paper, but it will be an active point of 5 This approach is a heuristic which has the virtue of ensuring that the labor share does not change when constructing the ‘with natural resource’ and ‘excluding natural resource’ measures of TFP growth. The approach implicitly treats land rents in agriculture as part of the compensation of employees in agriculture-dependent economies, however, and should be revisited in the next version of the _Wealth of Nations_ database.

> 6 See the online supplementary material from Feenstra et al. (2015) for details.

> 7 We eliminate the adjustment made by OECD for pollution abatement expenditures to increase comparability of the estimates.

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