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Production Factor Returns: The Role of Factor Utilization

Author

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  • Gilbert Cette

    (Centre de recherche de la Banque de France - Banque de France, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Nicolas Dromel

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Rémy Lecat

    (Centre de recherche de la Banque de France - Banque de France)

  • Anne-Charlotte Paret

    (Centre de recherche de la Banque de France - Banque de France, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

Short-term increasing returns to production factors are usually found in empirical studies. We argue they can be due to omitted variables, particularly the intensity of factor utilization. Thanks to original French firm-level data (1992–2008), we show how increasing returns to scale disappear when working time, capacity utilization rate, and, particularly, capital operating time are introduced in the production function.

Suggested Citation

  • Gilbert Cette & Nicolas Dromel & Rémy Lecat & Anne-Charlotte Paret, 2015. "Production Factor Returns: The Role of Factor Utilization," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01507167, HAL.
    • Handle: RePEc:hal:cesptp:hal-01507167
    DOI: 10.1162/REST_a_00434
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    References listed on IDEAS

    as
    1. Shapiro, Matthew D, 1993. "Cyclical Productivity and the Workweek of Capital," American Economic Review, American Economic Association, vol. 83(2), pages 229-233, May.
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    7. 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.
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    Cited by:

    1. Gilbert Cette & Nicolas Dromel & Rémy Lecat, 2013. "Labour Relations Quality and Productivity: An Empirical Analysis on French Firms," Review of Economics and Institutions, Università di Perugia, vol. 4(2).
    2. Cette Gilbert & Lecat Rémy & Ahmed Jiddou Ahmed Ould, 2016. "How do firms adjust production factors to the cycle?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 361-394, June.
    3. Françoise Delmez & Vincent Vandenberghe, 2017. "Working long hours: less productive but less costly? Firm-level evidence from Belgium," LIDAM Discussion Papers IRES 2017022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    4. Alex Clymo, 2019. "Dispersion Over the Business Cycle: Productivity versus Demand," 2019 Meeting Papers 1125, Society for Economic Dynamics.
    5. Yamaguchi, Rintaro, 2020. "Available capital, utilized capital, and shadow prices in inclusive wealth accounting," Ecological Economics, Elsevier, vol. 169(C).
    6. V. Bignon & F. Boissay & C. Cahn & L.-M. Harpedanne de Belleville, 2016. "Extended eligibility of credit claims for Eurosystem refinancing Consequences for the supply of credit to companies," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 43, pages 15-23, Autumn.
    7. James Harrigan & Ariell Reshef & Farid Toubal, 2018. "Techies, Trade, and Skill-Biased Productivity," NBER Working Papers 25295, National Bureau of Economic Research, Inc.
    8. Gilbert Cette & Rémy Lecat & Carole Ly-Marin, 2017. "Long-term growth and productivity projections in advanced countries," OECD Journal: Economic Studies, OECD Publishing, vol. 2016(1), pages 71-90.
    9. Francesco Daveri & Rémy Lecat & Maria Laura Parisi, 2016. "Service Deregulation, Competition, and the Performance of French and Italian Firms," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(3), pages 278-302, July.
    10. Shengyu Liu & Heng Yin, 2017. "A Structural Method to Estimate Firm-level Capacity Utilization and Application to Chinese Heavy Industries," Annals of Economics and Finance, Society for AEF, vol. 18(1), pages 1-28, May.
    11. J. Morenas & B. Rudelle, 2016. "Money and its counterparts in France and in the euro area," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 43, pages 25-34, Autumn.
    12. A. Berthou, 2016. "Current account adjustments and productivity dynamics in Europe during the crisis," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 43, pages 59-70, Autumn.
    13. Sandra NEVOUX & Loriane PY & Laurent BAUDRY & Souny HARTWEG & Agnès MINIER & Sylvie TARRIEU, 2019. "Productive capital operating times continued to increase in 2018 - Findings of the annual Banque de France survey [La durée d’utilisation des équipements continue de progresser en 2018. Résultats d," Bulletin de la Banque de France, Banque de France, issue 222.
    14. R. Cezar, 2016. "France’s trade integration measured in value added," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 43, pages 47-58, Autumn.
    15. V. Grossmann-Wirth & M. Vari, 2016. "Exiting low interest rates in a situation of excess liquidity: the experience of the Fed," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 43, pages 5-14, Autumn.
    16. Valérie Chouard & Laurent Baudry & Agnès Minier & Roxanne Tabouret & Sylvie Tarrieu, 2018. "Productive capital operating times increased sharply in 2017 – findings of the Banque de France survey [La durée d’utilisation des équipements progresse fortement en 2017 – Résultats de l’enquête m," Bulletin de la Banque de France, Banque de France, issue 216.
    17. C. Guette-Khiter, 2016. "Non-resident holdings of French CAC 40 companies at end-2015," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 43, pages 35-46, Autumn.
    18. Chouard, V. & Minier, A. & Tarrieu, S. & Baudry, L. & Soual, A., 2015. "La progression modérée de la durée d’utilisation des équipements se poursuit en 2014 - Résultats de l’enquête menée par la Banque de France," Bulletin de la Banque de France, Banque de France, issue 199, pages 43-52.
    19. Paul Bouche & Gilbert Cette & Rémy Lecat, 2021. "News from the Frontier: Increased Productivity Dispersion across Firms and Factor Reallocation," Review of Economics and Institutions, Università di Perugia, vol. 12(2).

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    More about this item

    Keywords

    Production function; productivity; factor returns;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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