Working Paper: NBER ID: w1561
Authors: Catherine J. Morrison
Abstract: Typically measures of multifactor productivity growth have been based on a production and optimization framework that assumes all inputs are instantaneously adjustable, thus ignoring the important impacts of short run fixity of certain inputs. This paper focuses on the distinction between short and long run production behavior represented by economic capacity utilization indexes, and on the adjustment of observed productivity measures for the effects of short run fixity characterized by these indexes. A dynamic optimization model based on adjustment costs for quasi-fixed inputs is developed to calculate capacity utilization adjustments for productivity growth measures. The resulting framework is then used to identify empirically the effects of capacity utilization, nonstatic expectations,nonconstant returns to scale and adjustment costs for both capital and labor on productivity growth in the U.S. manufacturing sector, 1947-1979.
Keywords: Productivity Measurement; Capacity Utilization; Nonstatic Expectations
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Capacity Utilization (CU) (D24) | Multifactor Productivity Growth (O49) |
| Nonstatic Expectations (D84) | Multifactor Productivity Growth (O49) |
| Adjustment Costs (D24) | Multifactor Productivity Growth (O49) |
| Nonconstant Returns to Scale (NCRTS) (D24) | Multifactor Productivity Growth (O49) |
| Divergence between Long-Run Equilibrium and Short-Run Temporary Equilibrium (Subequilibrium) (D59) | Multifactor Productivity Growth (O49) |
| Capacity Utilization (CU) (D24) | Divergence between Long-Run Equilibrium and Short-Run Temporary Equilibrium (Subequilibrium) (D59) |
| Nonstatic Expectations (D84) | Time Path of Investment (G11) |
| Adjustment Costs (D24) | Time Path of Investment (G11) |
| Time Path of Investment (G11) | Multifactor Productivity Growth (O49) |
| Subequilibrium (D59) | Multifactor Productivity Growth (O49) |
| Anticipatory Behavior (D84) | Multifactor Productivity Growth (O49) |