Advanced Search
MyIDEAS: Login to save this paper or follow this series

Intermediate inputs and economic productivity

Contents:

Author Info

  • Simon Baptist
  • Cameron Hepburn

Abstract

Many models of economic growth exclude materials, energy and other intermediate inputs from the production function. Growing environmental pressures and resource prices suggest that this may be increasingly inappropriate. This paper explores the relationship between intermediate input intensity, productivity and national accounts using a panel data set of manufacturing subsectors in the United States over 47 years. The first contribution is to identify sectoral production functions that incorporate intermediate inputs, while allowing for heterogeneity in both technology and productivity. The second contribution is that the paper finds a negative correlation between intermediate input intensity and total factor productivity (TFP) — sectors that are less intensive in their use of intermediate inputs have higher rates of productivity.This finding is replicated at the firm level. We propose tentative hypotheses to explain this association, but testing and further disaggregation of intermediate inputs is left for further work. Further work could also explore more directlythe relationship between material inputs and economic growth — given the high further work on material efficiency. Depending upon the nature of the mechanismlinking a reduction in intermediate input intensity to an increase in TFP, the implications could be significant. A third contribution is to suggest that an empirical bias in productivity, as measured in national accounts, may arise due to the exclusion of intermediate inputs. Current conventions of measuring productivity in national accounts may overstate the productivity of resource-intensive sectors relative to other sectors.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/02/WP95-inputs-and-economic-productivity.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Grantham Research Institute on Climate Change and the Environment in its series Grantham Research Institute on Climate Change and the Environment Working Papers with number 95.

as in new window
Length:
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:lsg:lsgwps:wp95

Contact details of provider:
Postal: Houghton Street, London WC2A 2AE
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/grantham.
More information through EDIRC

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Markus Eberhardt & Francis Teal, 2009. "Econometrics for Grumblers: A New Look at the Literature on Cross-Country Growth Empirics," CSAE Working Paper Series 2009-07, Centre for the Study of African Economies, University of Oxford.
  2. Kenneth Arrow & Partha Dasgupta & Lawrence Goulder & Gretchen Daily & Paul Ehrlich & Geoffrey Heal & Simon Levin & Karl-Göran Mäler & Stephen Schneider & David Starrett & Brian Walker, 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 147-172, Summer.
  3. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August.
  4. Peter Mawson & Kenneth I Carlaw & Nathan McLellan, 2003. "Productivity Measurement: Alternative Approaches and Estimates," Treasury Working Paper Series 03/12, New Zealand Treasury.
  5. Ayres, Robert U., 2007. "On the practical limits to substitution," Ecological Economics, Elsevier, vol. 61(1), pages 115-128, February.
  6. Hannon, Bruce & Blazeck, Thomas & Kennedy, Douglas & Illyes, Robert, 1983. "A comparison of energy intensities : 1963, 1967 and 1972," Resources and Energy, Elsevier, vol. 5(1), pages 83-102, March.
  7. Ross Garnaut & Stephen Howes & Frank Jotzo & Peter Sheehan, 2008. "Emissions in the Platinum Age: the implications of rapid development for climate-change mitigation," Oxford Review of Economic Policy, Oxford University Press, vol. 24(2), pages 377-401, Summer.
  8. Jorgenson, Dale W, 1984. "The Role of Energy in Productivity Growth," American Economic Review, American Economic Association, vol. 74(2), pages 26-30, May.
  9. Arrow, Kenneth J. & Dasgupta, Partha & Goulder, Lawrence H. & Mumford, Kevin J. & Oleson, Kirsten, 2012. "Sustainability and the measurement of wealth," Environment and Development Economics, Cambridge University Press, vol. 17(03), pages 317-353, June.
  10. David I. Stern, 2012. "Ecological Economics," Crawford School Research Papers 1203, Crawford School of Public Policy, The Australian National University.
  11. Lawrence H. Goulder, 1994. "Environmental Taxation and the "Double Dividend:" A Reader's Guide," NBER Working Papers 4896, National Bureau of Economic Research, Inc.
  12. Feng, Guohua & Serletis, Apostolos, 2008. "Productivity trends in U.S. manufacturing: Evidence from the NQ and AIM cost functions," Journal of Econometrics, Elsevier, vol. 142(1), pages 281-311, January.
  13. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
  14. Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-68, August.
  15. Cleveland, Cutler J. & Ruth, Matthias, 1997. "When, where, and by how much do biophysical limits constrain the economic process?: A survey of Nicholas Georgescu-Roegen's contribution to ecological economics," Ecological Economics, Elsevier, vol. 22(3), pages 203-223, September.
  16. Homi Kharas, 2010. "The Emerging Middle Class in Developing Countries," OECD Development Centre Working Papers 285, OECD Publishing.
  17. Stephen P. A. Brown & Mine K. Yücel, 2001. "Energy prices and aggregate economic activity: an interpretive survey," Working Papers 0102, Federal Reserve Bank of Dallas.
  18. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
  19. Dale W. Jorgenson, 1984. "The Role of Energy in Productivity Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 11-26.
  20. Barro, Robert J, 1999. " Notes on Growth Accounting," Journal of Economic Growth, Springer, vol. 4(2), pages 119-37, June.
  21. M. Hashem Pesaran, 2004. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," CESifo Working Paper Series 1331, CESifo Group Munich.
  22. Beaudreau, Bernard C., 1995. "The impact of electric power on productivity : A study of US manufacturing 1950-1984," Energy Economics, Elsevier, vol. 17(3), pages 231-236, July.
  23. Garnaut, Ross & Clunies-Ross, Anthony, 1983. "Taxation of Mineral Rents," OUP Catalogue, Oxford University Press, edition 1, number 9780198284543, October.
  24. Fisher, Franklin M, 1969. "The Existence of Aggregate Production Functions," Econometrica, Econometric Society, vol. 37(4), pages 553-77, October.
  25. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
  26. Kravis, Irving B, 1976. "A Survey of International Comparisons of Productivity," Economic Journal, Royal Economic Society, vol. 86(341), pages 1-44, March.
  27. Ayres, Robert U. & Warr, Benjamin, 2005. "Accounting for growth: the role of physical work," Structural Change and Economic Dynamics, Elsevier, vol. 16(2), pages 181-209, June.
  28. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lsg:lsgwps:wp95. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The GRI Administration).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.