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Factor Utilisation and Productivity Estimates for the United Kingdom

  • Larsen, Jens

    (Bank of England)

  • Katharine Neiss
  • Fergal Shortall

This paper derives series for capital utilisation, labour effort and total factor productivity from a DGE model with variable utilisation and labour adjustment costs. Capital utilisation tracks survey-based measures closely, while movements in total hours worked drive our labour effort series. TFP is less cyclical than the traditional Solow residual, though a weighted average of capital utilisation and labour effort - aggregate factor utilisation - and the Solow residual are not closely related. Rather, aggregate factor utilisation is correlated with detrended labour productivity, providing more evidence that differences in average and marginal labour productivity may be linked to factor hoarding.

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Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 120.

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Date of creation: 29 Aug 2002
Date of revision:
Handle: RePEc:ecj:ac2002:120
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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper Series WP-01-08, Federal Reserve Bank of Chicago.
  2. Chang, Yongsung & Kwark, Noh-Sun, 2001. "Decomposition of hours based on extensive and intensive margins of labor," Economics Letters, Elsevier, vol. 72(3), pages 361-367, September.
  3. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-73, April.
  4. 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.
  5. Roberts John M., 2005. "How Well Does the New Keynesian Sticky-Price Model Fit the Data?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-39, September.
  6. Burnside, Craig & Eichenbaum, Martin, 1996. "Factor-Hoarding and the Propagation of Business-Cycle Shocks," American Economic Review, American Economic Association, vol. 86(5), pages 1154-74, December.
  7. Matthew D. Shapiro, 1989. "Assessing the Federal Reserve's Measures of Capacity and Utilization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 181-242.
  8. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  9. Erik Britton & Jens D J Larsen & Ian Small, 2000. "Imperfect competition and the dynamics of mark-ups," Bank of England working papers 110, Bank of England.
  10. John G. Fernald & Susanto Basu, 1999. "Why is productivity procyclical? Why do we care?," International Finance Discussion Papers 638, Board of Governors of the Federal Reserve System (U.S.).
  11. Katharine S Neiss & Evi Pappa, 2002. "A monetary model of factor utilisation," Bank of England working papers 154, Bank of England.
  12. Ravn, Morten O, 1997. "Permanent and Transitory Shocks, and the UK Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(1), pages 27-48, Jan.-Feb..
  13. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  14. James H. Stock & Mark W. Watson, 1999. "Forecasting Inflation," NBER Working Papers 7023, National Bureau of Economic Research, Inc.
  15. repec:cup:macdyn:v:3:y:1999:i:3:p:368-83 is not listed on IDEAS
  16. Mark Bils & Jang-Ok Cho, 1993. "Cyclical factor utilization," Discussion Paper / Institute for Empirical Macroeconomics 79, Federal Reserve Bank of Minneapolis.
  17. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
  18. Muellbauer, John, 1986. "The Assessment: Productivity and Competitiveness in British Manufacturing," Oxford Review of Economic Policy, Oxford University Press, vol. 2(3), pages i-xxv, Autumn.
  19. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
  20. Cook, David, 1999. "Real Propagation of Monetary Shocks: Dynamic Complementarities and Capital Utilization," Macroeconomic Dynamics, Cambridge University Press, vol. 3(03), pages 368-383, September.
  21. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
  22. Francis Green, 2001. "It's Been A Hard Day's Night: The Concentration and Intensification of Work in Late Twentieth-Century Britain," British Journal of Industrial Relations, London School of Economics, vol. 39(1), pages 53-80, 03.
  23. Robert J. Gordon, 1998. "Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 297-346.
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