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Procyclical Productivity in Manufacturing

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Author Info
Lucas Navarro
Raimundo Soto () (Instituto de Economía. Pontificia Universidad Católica de Chile.)

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Abstract

We study the cyclical behavior of labor productivity in eighty industries of the Chilean manufacturing sector in the 1979-2001 period. We find that labor productivity at the sector level is procyclical but it is a-cyclical when using aggregate data. We provide an analytical and empirical explanation for this divergence. We also use an econometric model to quantify the determinants of productivity. The results indicate that technology shocks account for one half of productivity growth, thus supporting the supply shocks hypothesis as the main source of business cycles in Chile. The other 50% of the productivity changes is explained by reallocation of resources from less to more productive sectors as well as the presence of increasing returns. Variations in factor utilization were insignificant.

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Publisher Info
Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.

Volume (Year): 43 (2006)
Issue (Month): 127 ()
Pages: 193-220
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ioe:cuadec:v:43:y:2006:i:127:p:193-220

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Related research
Keywords: Productivity; Procyclical; Manufacturing; Aggregation Bias.;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Fay, Jon A & Medoff, James L, 1985. "Labor and Output over the Business Cycle: Some Direct Evidence," American Economic Review, American Economic Association, vol. 75(4), pages 638-55, September. [Downloadable!] (restricted)
  2. Rodrigo Fuentes & Mauricio Larraín & Klaus Schmidt-Hebbel, 2006. "Sources of Growth and Behavior of TFP in Chile," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 43(127), pages 113-142. [Downloadable!]
  3. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept. [Downloadable!] (restricted)
  4. Raphael Bergoeing & Raimundo Soto, 2002. "Testing Real Business Cycles Models in an Emerging Economy," Working Papers Central Bank of Chile 159, Central Bank of Chile. [Downloadable!]
    Other versions:
  5. Peter K. Schott & Andrew B. Bernard & Stephen J. Redding, 2005. "Products and Productivity," NBER Working Papers 11575, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1993. "Labor Hoarding and the Business Cycle," NBER Working Papers 3556, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Raphael Bergoeing & Andrea Repetto, 2006. "Micro Efficiency and Aggregate Growth in Chile," Documentos de Trabajo 218, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
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  8. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2004. "The Effects of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia," Economics Working Papers 763, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  9. Raphael Bergoeing & Norman Loayzaw & Andrea Repetto, 2004. "Slow Recoveries," NBER Working Papers 10584, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Susanto Basu & John Fernald, 2000. "Why is productivity procyclical? Why do we care?," Working Paper Series WP-00-11, Federal Reserve Bank of Chicago. [Downloadable!]
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  11. Basu, Susanto, 1996. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 719-51, August. [Downloadable!] (restricted)
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  12. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "A Decade Lost and Found: Mexico and Chile in the 1980s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 166-205, January. [Downloadable!] (restricted)
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  13. Hart, Robert A & Malley, James R, 1999. "Procyclical Labour Productivity: A Closer Look at a Stylized Fact," Economica, London School of Economics and Political Science, vol. 66(264), pages 533-50, November. [Downloadable!] (restricted)
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  15. King, Robert G. & Rebelo, Sergio T., 1993. "Low frequency filtering and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 207-231. [Downloadable!] (restricted)
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  16. Inklaar, Robert, 2005. "Cyclical productivity in Europe and the United States, evaluating the evidence on returns to scale and input utilization," GGDC Research Memorandum 200574, Groningen Growth and Development Centre, University of Groningen. [Downloadable!]
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  17. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  18. Julio J. Rotemberg, 1999. "A Heuristic Method for Extracting Smooth Trends from Economic Time Series," NBER Working Papers 7439, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. Jimenez, Miguel & Marchetti, Domenico J, 2002. "Interpreting the Procyclical Productivity of Manufacturing Sectors: Can We Really Rule Out External Effects?," Applied Economics, Taylor and Francis Journals, vol. 34(7), pages 805-17, May. [Downloadable!] (restricted)
  20. Alexis Camhi & Eduardo Engel & Alejandro Micco, 1997. "Dinámica de empleo y productividad en manufactura: Evidencia micro y consecuencias macro," Documentos de Trabajo 19, Centro de Economía Aplicada, Universidad de Chile.
  21. Caballero, Ricardo J. & Lyons, Richard K., 1992. "External effects in U.S. procyclical productivity," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 209-225, April. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Klaus Schmidt-Hebbel, 2006. "Chile’s Economic Growth," Working Papers Central Bank of Chile 365, Central Bank of Chile. [Downloadable!]
  2. Klaus Schmidt-Hebbel, 2006. "Chile's Economic Growth," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 43(127), pages 5-48. [Downloadable!]
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This page was last updated on 2009-11-12.

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