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The behaviour of productivity growth rates and price-cost margins during contractions and expansions

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  • Daniel Ryan

Abstract

Panel data on thirteen two-digit US manufacturing industries were analysed using a random coefficients approach to determine the behaviour of total factor productivity growth rates and price—marginal cost ratios during recessions and expansions. Results show: (1) productivity growth is procyclical—it decreases during recessions and increases during expansions. In addition, the decrease during recessions is greater than the increase during expansions; (2) the price-marginal cost ratio is very asymmetric — it decreases during recessions but shows no significant movement during an expansion. The lower price-marginal cost ratio during a recession implies that the elasticity of output with respect to labour decreases. Thus not only does the level of productivity fall, but the productivity of labour relative to capital also falls. These characteristics are consistent with labour hoarding.

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  • Daniel Ryan, 1997. "The behaviour of productivity growth rates and price-cost margins during contractions and expansions," Applied Economics, Taylor & Francis Journals, vol. 29(7), pages 889-893.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:7:p:889-893
    DOI: 10.1080/000368497326543
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    Cited by:

    1. M. Ali Choudhary & Vasco Gabriel, 2009. "Is there really a gap between aggregate productivity and technology?," Applied Economics, Taylor & Francis Journals, vol. 41(27), pages 3499-3503.
    2. Daniel Ryan, 2000. "Fluctuations in productivity growth rates and input utilization in U.S. manufacturing," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 28(2), pages 150-163, June.
    3. Andrea Vaona, 2016. "A nonparametric panel data approach to the cyclical dynamics of price-cost margins in the fourth Kondratieff wave," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 155-170, August.
    4. Vaona, Andrea, 2010. "A nonparametric panel data approach to the cyclical dynamics of price-cost margins," Kiel Working Papers 1580, Kiel Institute for the World Economy (IfW Kiel).

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