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Cyclical productivity in Europe and the United States, evaluating the evidence on returns to scale and input utilization

  • Inklaar, Robert

    (Groningen University)

This paper studies procyclical productivity growth at the industry level in the U.S. and in three European countries (France, Germany and the Netherlands). Industry-specific demand-side instruments are used to examine the prevalence of non-constant returns to scale and unmeasured input utilization. For the aggregate U.S. economy, unmeasured input utilization seems to explain procyclical productivity. However, this correction still leaves one in three U.S. industries with procyclical productivity. This failure of the model can also be seen in Europe and is mostly concentrated in services industries.

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File URL: http://irs.ub.rug.nl/ppn/275090671
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Paper provided by Groningen Growth and Development Centre, University of Groningen in its series GGDC Research Memorandum with number 200574.

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Date of creation: 2005
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Handle: RePEc:dgr:rugggd:200574
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  1. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sérgio, 1995. "Capital Utilization and Returns to Scale," CEPR Discussion Papers 1221, C.E.P.R. Discussion Papers.
  2. Joaquim Oliveira Martins & Stefano Scarpetta & Dirk Pilat, 1996. "Mark-Up Ratios in Manufacturing Industries: Estimates for 14 OECD Countries," OECD Economics Department Working Papers 162, OECD Publishing.
  3. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
  4. Caballero, Ricardo J. & Lyons, Richard K., 1990. "Internal versus external economies in European industry," European Economic Review, Elsevier, vol. 34(4), pages 805-826, June.
  5. Matthew D. Shapiro, 1996. "Macroeconomic Implications of Variation in the Workweek of Capital," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 79-134.
  6. Baily, Martin Neil & Bartelsman, Eric J. & Haltiwanger, John, 1995. "Labor productivity: structural change and cyclical dynamics," Serie Research Memoranda 0050, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  7. Bartelsman, Eric J & Caballero, Ricardo J & Lyons, Richard K, 1994. "Customer- and Supplier-Driven Externalities," American Economic Review, American Economic Association, vol. 84(4), pages 1075-84, September.
  8. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  9. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October.
  10. Caballero, Ricardo J. & Lyons, Richard K., 1992. "External effects in U.S. procyclical productivity," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 209-225, April.
  11. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
  12. Robert A Hart & James R Malley, 1993. "Excess Labour and the Business Cycle: A Comparativer Study of Japan, Germany, the United Kingdom and the United States," Working Papers Series 93/6, University of Stirling, Division of Economics.
  13. Shea, John, 1993. "The Input-Output Approach to Instrument Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(2), pages 145-55, April.
  14. Robert E. Hall, 2004. "Measuring Factor Adjustment Costs," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 899-927, August.
  15. Robert J. Gordon, 2000. "Does the "New Economy" Measure up to the Great Inventions of the Past?," NBER Working Papers 7833, National Bureau of Economic Research, Inc.
  16. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
  17. Susanto Basu & John Fernald, 2001. "Why Is Productivity Procyclical? Why Do We Care?," NBER Chapters, in: New Developments in Productivity Analysis, pages 225-302 National Bureau of Economic Research, Inc.
  18. Julio J. Rotemberg & Michael Woodford, 1993. "Dynamic General Equilibrium Models with Imperfectly Competitive Product Markets," NBER Working Papers 4502, National Bureau of Economic Research, Inc.
  19. Sbordone, Argia M, 1997. "Interpreting the Procyclical Productivity of Manufacturing Sectors: External Effects or Labor Hoarding?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 26-45, February.
  20. Imbs, Jean M., 1999. "Technology, growth and the business cycle," Journal of Monetary Economics, Elsevier, vol. 44(1), pages 65-80, August.
  21. Kevin J. Fox & W. Erwin Diewert, 2004. "On the Estimation of Returns to Scale, Technical Progress and Monopolistic Markups," Econometric Society 2004 Australasian Meetings 310, Econometric Society.
  22. Hart, Robert A & Malley, James R, 1999. "Procyclical Labour Productivity: A Closer Look at a Stylized Fact," Economica, London School of Economics and Political Science, vol. 66(264), pages 533-50, November.
  23. Vecchi, Michela, 2000. "Increasing Returns, Labour Utilization and Externalities: Procyclical Productivity in the United States and Japan," Economica, London School of Economics and Political Science, vol. 67(266), pages 229-44, May.
  24. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  25. 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.
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