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Productivity Measurement with Nonstatic Expectations and Varying Capacity Utilization: An Integrated Approach

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Catherine J. Morrison

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Abstract

Typically measures of multifactor productivity growth have been based on a production and optimization framework that assumes all inputs are instantaneously adjustable, thus ignoring the important impacts of short run fixity of certain inputs. This paper focuses on the distinction between short and long run production behavior represented by economic capacity utilization indexes, and on the adjustment of observed productivity measures for the effects of short run fixity characterized by these indexes. A dynamic optimization model based on adjustment costs for quasi-fixed inputs is developed to calculate capacity utilization adjustments for productivity growth measures. The resulting framework is then used to identify empirically the effects of capacity utilization, nonstatic expectations,nonconstant returns to scale and adjustment costs for both capital and labor on productivity growth in the U.S. manufacturing sector, 1947-1979.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1561.

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Date of creation: Feb 1985
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Handle: RePEc:nbr:nberwo:1561

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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. Morrison, Catherine J, 1985. "On the Economic Interpretation and Measurement of Optimal Capacity Utilization with Anticipatory Expectations," Review of Economic Studies, Blackwell Publishing, vol. 52(2), pages 295-310, April. [Downloadable!] (restricted)
    Other versions:
  2. Baily, Martin Neil, 1981. "The Productivity Growth Slowdown and Capital Accumulation," American Economic Review, American Economic Association, vol. 71(2), pages 326-31, May. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. Lau, Lawrence J., 1978. "Applications of Profit Functions," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 3 McMaster University Archive for the History of Economic Thought. [Downloadable!]
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(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. E Abdul Azeez, 2007. "Economic Reforms and Industrial Performance An Analysis of Capacity Utilisation in Indian Manufacturing," Working Papers id:979, esocialsciences.com. [Downloadable!]
  2. Bertrand Koebel, 2000. "Prix virtuels en analyse de la production," Annales d'Economie et de Statistique, ADRES, issue 57, pages 10, Janvier-M. [Downloadable!]
  3. Catherine J. Morrison, 1989. "Markup Behavior in Durable and Nondurable Manufacturing: A production Theory Approach," NBER Working Papers 2941, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Phoebus J Dhrymes, 1991. "The Structure Of Production Technology Productivity And Aggregation Effects," Working Papers 91-5, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  5. James Kirkley & Catherine Morrison Paul & Dale Squires, 2002. "Capacity and Capacity Utilization in Common-pool Resource Industries," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 71-97, June. [Downloadable!] (restricted)
  6. Alston, Julian & Andersen, Matt & Pardey, Philip G., 2006. "Asset Utilization and Bias in Measures of U.S. Agricultural Productivity," 2006 Annual meeting, July 23-26, Long Beach, CA 21220, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  7. M. Ishaq Nadiri & Ingmar R. Prucha, 1991. "Dynamic Factor Demand Models, Productivity Measurement, and Rates of Return: Theory and an Empirical Application to the U.S. Bell System," NBER Working Papers 3041, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Altug, Sumru G. & Filiztekin, Alpay, 1999. "Estimates of the Returns to Scale for US Manufacturing," CEPR Discussion Papers 2121, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  9. Luis Gutierrez & Carlos Pombo, 2005. "Firm Entry and Productivity Turnovers in Import Substituting Markets: Evidence from the Petrochemical Industry in Colombia," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 63, pages 137-185, Julio-Dic. [Downloadable!]
  10. Berndt, Ernst R. & Fuss, Melvyn A., 1989. "Economic capacity utilization and productivity measurement for multiproduct firms with multiple quasi-fixed inputs," Working papers 3001-89., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  11. Prucha, Ingmar R. & Nadiri, M. Ishaq, 1991. "Endogenous Capital Utilization and Productivity Measurement in Dynamic Factor Demand Models: Theory and an Application to the U.S. Electrical Machinery Industry," Working Papers 91-04, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  12. Catherine J. Morrison, 1989. "Unraveling the Productivity Growth Slowdown in the U.S., Canada and Japan: The Effects of Subequilibrium, Scale Economies and Markup," NBER Working Papers 2993, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Subal C. Kumbhakar & Ana Lozano-Vivas, 2004. "Deregulation and Productivity: The Case of Spanish Banks," Economic Working Papers at Centro de Estudios Andaluces E2004/24, Centro de Estudios Andaluces. [Downloadable!]
    Other versions:
  14. Aloi, Marta & Dixon, Huw, 2002. "Entry Dynamics, Capacity Utilisation and Productivity in a Dynamic Open Economy," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  15. Nadiri, M. Ishaq & Prucha, Ingmar R., 1989. "Dynamic Factor Demand Models, Productivity Measurement, And Rates Return: Theory And An Empirical Application To The U.S. Bell System," Working Papers 89-15, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  16. Andersen, Matt A. & Alston, Julian M. & Pardey, Philip G., 2007. "Capital Use Intensity and Productivity Biases," Staff Papers 7314, University of Minnesota, Department of Applied Economics. [Downloadable!]
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