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Raw Materials, Profits, and the Productivity Slowdown (Rev)

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  • Michael Bruno
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    Abstract

    A factor-price frontier framework is used to clarify the analogy of an increase (decrease) in raw material prices with that of autonomous technological regress (progress). Factor-price profiles estimated for the United States, the United Kingdom, Germany, and Japan bring out the major role of raw materials in the profit and product wage squeeze after 1972, with some differences between countries. The production model, in conjunction with estimates obtained from the factor-price frontier, attributes almost all the slowdown in total productivity to the rise in relative raw material prices. It is also shown that part of the apparent productivity riddle has to do with the common use of double-deflated national accounting measures of value added, which have an inherent measurement bias.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0660.

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    Date of creation: Apr 1981
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    Publication status: published as Quarterly Journal of Economics, vol.99, no. 1, pp1-29, February 1987.
    Handle: RePEc:nbr:nberwo:0660

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    1. Holland, Daniel M & Myers, Stewart C, 1980. "Profitability and Capital Costs for Manufacturing Corporations and All Nonfinancial Corporations," American Economic Review, American Economic Association, vol. 70(2), pages 320-25, May.
    2. M. Ishaq Nadiri, 1980. "Sectoral Productivity Slowdown," NBER Working Papers 0423, National Bureau of Economic Research, Inc.
    3. Zvi Griliches, 1980. "R&D and the Productivity Slowdown," NBER Working Papers 0434, National Bureau of Economic Research, Inc.
    4. Nadiri, M Ishaq, 1980. "Sectoral Productivity Slowdown," American Economic Review, American Economic Association, vol. 70(2), pages 349-52, May.
    5. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    6. Martin Feldstein & Lawrence Summers, 1977. "Is the Rate of Profit Falling?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1), pages 211-228.
    7. Irving B. Kravis & Robert E. Lipsey, 1981. "Prices and Terms of Trade for Developed-Country Exports of Manufactured Goods," NBER Working Papers 0774, National Bureau of Economic Research, Inc.
    8. Jeffrey D. Sachs, 1979. "Wages, Profits, and Macroeconomic Adjustment: A Comparative Study," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 269-332.
    9. Bruno, Michael, 1978. "Duality, Intermediate Inputs and Value-Added," Histoy of Economic Thought Chapters, McMaster University Archive for the History of Economic Thought, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 1 McMaster University Archive for the History of Economic Thought.
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    Cited by:
    1. Griliches, Zvi & Mairesse, Jacques, 1983. "Comparing productivity growth: An exploration of french and U.S. industrial and firm data," European Economic Review, Elsevier, vol. 21(1-2), pages 89-119.
    2. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
    3. Michael Bruno, 1981. "Adjustment and Structural Change under Supply Shocks," NBER Working Papers 0814, National Bureau of Economic Research, Inc.

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