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Raw Materials, Profits, and the Productivity Slowdown (Rev)

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  • Michael Bruno

Abstract

A factor-price frontier framework is used to clarify the analogy of an increase (decrease) in raw material prices with that of autonomous technological regress (progress). Factor-price profiles estimated for the United States, the United Kingdom, Germany, and Japan bring out the major role of raw materials in the profit and product wage squeeze after 1972, with some differences between countries. The production model, in conjunction with estimates obtained from the factor-price frontier, attributes almost all the slowdown in total productivity to the rise in relative raw material prices. It is also shown that part of the apparent productivity riddle has to do with the common use of double-deflated national accounting measures of value added, which have an inherent measurement bias.

Suggested Citation

  • Michael Bruno, 1981. "Raw Materials, Profits, and the Productivity Slowdown (Rev)," NBER Working Papers 0660, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0660
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    References listed on IDEAS

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    1. Jeffrey D. Sachs, 1979. "Wages, Profits, and Macroeconomic Adjustment: A Comparative Study," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 269-332.
    2. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    3. Martin Feldstein & Lawrence Summers, 1977. "Is the Rate of Profit Falling?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1), pages 211-228.
    4. Irving B. Kravis & Robert E. Lipsey, 1981. "Prices and Terms of Trade for Developed-Country Exports of Manufactured Goods," NBER Working Papers 0774, National Bureau of Economic Research, Inc.
    5. M. Ishaq Nadiri, 1980. "Sectoral Productivity Slowdown," NBER Working Papers 0423, National Bureau of Economic Research, Inc.
    6. Griliches, Zvi, 1980. "R & D and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 70(2), pages 343-348, May.
    7. Holland, Daniel M & Myers, Stewart C, 1980. "Profitability and Capital Costs for Manufacturing Corporations and All Nonfinancial Corporations," American Economic Review, American Economic Association, vol. 70(2), pages 320-325, May.
    8. Nadiri, M Ishaq, 1980. "Sectoral Productivity Slowdown," American Economic Review, American Economic Association, vol. 70(2), pages 349-352, May.
    9. Bruno, Michael, 1978. "Duality, Intermediate Inputs and Value-Added," Histoy of Economic Thought Chapters,in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 1 McMaster University Archive for the History of Economic Thought.
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    Cited by:

    1. Van De Klundert, Theo, 1983. "The energy problem in a small open economy," Journal of Macroeconomics, Elsevier, vol. 5(2), pages 211-222.
    2. Giersch, Herbert & Wolter, Frank, 1982. "On the recent slowdown in productivity growth in advanced economies," Kiel Working Papers 148, Kiel Institute for the World Economy (IfW).
    3. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
    4. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-330, April.
    5. Michael Bruno, 1981. "Adjustment and Structural Change under Supply Shocks," NBER Working Papers 0814, National Bureau of Economic Research, Inc.
    6. Zvi Griliches, 1998. "Comparing Productivity Growth: An Exploration of French and U.S. Industrial and Firm Data," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 157-186 National Bureau of Economic Research, Inc.
    7. Richard C. Marston & Stephen J. Turnovsky, 1985. "Imported Materials Prices, Wage Policy, and Macro-economic Stabilization," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 273-284, May.

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