Efficiency Adjustment of Hours Worked: Two Possible Modifications of a Jorgensen Production Model

This article focuses on two features of the Jorgenson model of production, which is commonly used in productivity research. First, that capital stock is efficiency adjusted in that model, but hours are not. If hours are efficiency adjusted, as proposed in this article, the efficiency per hour of a much younger male college degree worker in a specific year, say 25 years old in 1980, may be different than that of a 50 year old college degree worker in that same year. Second, this article asks whether the assumption of no vitnage effects in the Jorgenson model is valid. In such a model, it is assumed that at the lowest level of detail, the efficiency of a particular type of worker as measured by quality, (marginal product, or labour input divided by hours worked), is constant over time. With no vintage effects, the efficiency of a 50 year old male with a college degree, is the same in 1980 and 2000. Hours are adjusted for efficiency by age using OECD’s 2012 Programme for the International Assessment of Adult Competencies (PIAAC).