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Factor Adjustment, Quality Change, and Productivity Growth for U.S. Manufacturing

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  • Jeffrey I. Bernstein
  • Theofanis P. Mamuneas
  • Panos Pashardes

Abstract

This paper accounts for quality improvements and adjustment costs in all inputs to U.S. manufacturing production. Adjustment processes for non-capital inputs are slower than previously recognized. Annual adjustment percentages are: labor 77, capital 30, energy 20, and materials 21. Factor prices should be adjusted for quality improvements to reflect higher marginal products. The percentage increases in marginal products from quality improvements are: labor 0.25, capital 0.30, energy 2.13, and materials 0.92. Observed input growth should be adjusted for quality improvements. Unadjusted input growth causes efficiency-based productivity growth rates to exceed observed productivity growth in the slowdown period of 1974 - 1995.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6877.

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Date of creation: Jan 1999
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Handle: RePEc:nbr:nberwo:6877

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  1. repec:ubc:bricol:89-07 is not listed on IDEAS
  2. Morrison, C. J. & Berndt, E. R., 1981. "Short-run labor productivity in a dynamic model," Journal of Econometrics, Elsevier, vol. 16(3), pages 339-365, August.
  3. Diewert, W. E. & Wales, T. J., 1988. "A normalized quadratic semiflexible functional form," Journal of Econometrics, Elsevier, vol. 37(3), pages 327-342, March.
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  5. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
  6. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
  7. repec:ubc:bricol:98-04 is not listed on IDEAS
  8. Griliches, Zvi, 1994. "Productivity, R&D, and the Data Constraint," American Economic Review, American Economic Association, vol. 84(1), pages 1-23, March.
  9. W. Erwin Diewert & Kevin J. Fox, 1999. "Can measurement error explain the productivity paradox?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 251-280, April.
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