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The Sensitivity of Productivity Growth Measures to Alternative Structural and Behavioral Assumptions: An Application to Electric Utilities, 1951-1984

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  • Callan, Scott J

Abstract

This article examines the sensitivity of three alternative multifactor productivity growth estimates for the electric-utility industry during the 1951-84 period. The results indicate that multifactor productivity growth estimates are quite sensitive to the relaxation of various structural and behavioral assumptions. First, a benchmark measure is contructed along the line as suggested by Solow (1957). This "residual" approach produces estimates that suggest a substantial decline in firm-level productivity growth after the mid-1960s. Prior to obtaining the second and third estimates, empirical tests of the structural and behavioral assumptions underlying a firm's operation are conducted. First, the structural assumption of constant returns to scale is rejected, and the resulting long-run scale-adjusted multifactor productivity growth estimates are found to be consistently less than the residual estimates. Second, the behavioral assumption of long-run equilibrium is rejected. Comparing the long-run scale-adjusted estimates to scale-adjusted short-run multifactor productivity growth estimates reveals substantial differences.

Suggested Citation

  • Callan, Scott J, 1991. "The Sensitivity of Productivity Growth Measures to Alternative Structural and Behavioral Assumptions: An Application to Electric Utilities, 1951-1984," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(2), pages 207-213, April.
    • Handle: RePEc:bes:jnlbes:v:9:y:1991:i:2:p:207-13
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    Cited by:

    1. Wu, Zai Bin & Yeung, Godfrey & Mok, Vincent & Han, Zhaozhou, 2007. "Firm-specific knowledge and technical efficiency of watch and clock manufacturing firms in China," International Journal of Production Economics, Elsevier, vol. 107(2), pages 317-332, June.
    2. Filippini, Massimo & Wild, Jorg, 2001. "Regional differences in electricity distribution costs and their consequences for yardstick regulation of access prices," Energy Economics, Elsevier, vol. 23(4), pages 477-488, July.
    3. Scott Atkinson & Jeffrey Dorfman, 2005. "Multiple Comparisons with the Best: Bayesian Precision Measures of Efficiency Rankings," Journal of Productivity Analysis, Springer, vol. 23(3), pages 359-382, July.
    4. Daniel Schunk & Bruce Hannon, 2004. "Impacts of a carbon tax policy on Illinois grain farms: a dynamic simulation study," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 6(3), pages 221-247, September.
    5. Azzeddine Azzam & Rigoberto Lopez & Elena Lopez, 2004. "Imperfect Competition and Total Factor Productivity Growth," Journal of Productivity Analysis, Springer, vol. 22(3), pages 173-184, November.
    6. Travaglini, Giuseppe, 2012. "Trade-off between labor productivity and capital accumulation in Italian energy sector," Journal of Policy Modeling, Elsevier, vol. 34(1), pages 35-48.
    7. Giannis Karagiannis & George Mergos, 2000. "Total Factor Productivity Growth and Technical Change in a Profit Function Framework," Journal of Productivity Analysis, Springer, vol. 14(1), pages 31-51, July.
    8. Song, Yang & Yeung, Godfrey & Zhu, Daolin & Xu, Yang & Zhang, Lixin, 2022. "Efficiency of urban land use in China’s resource-based cities, 2000–2018," Land Use Policy, Elsevier, vol. 115(C).
    9. Atkinson, Scott E. & Primont, Daniel, 2002. "Stochastic estimation of firm technology, inefficiency, and productivity growth using shadow cost and distance functions," Journal of Econometrics, Elsevier, vol. 108(2), pages 203-225, June.
    10. George Mergos & Giannis Karagiannis, 1997. "Sources Of Productivity Change Under Temporary Equilibrium And Application To Greek Agriculture," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1‐3), pages 313-329, January.
    11. Nadeem Burney, 1998. "Economies of scale and utilization in electricity generation in Kuwait," Applied Economics, Taylor & Francis Journals, vol. 30(6), pages 815-819.

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