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Productivity Growth and Capacity Utilization

Listed author(s):
  • Gu, Wulong
  • Wang, Weimin

This paper presents a non-parametric approach for adjusting the multifactor productivity growth (MFPG) measure for variations in capacity utilization over time. In the framework developed here, a capital utilization measure is derived from the economic theory of production and is estimated by comparing the ex-post return with the ex-ante expected return on capital. The non-parametric approach is then compared with the parametric approach and the standard growth accounting framework. Both the non-parametric and parametric approaches correct for the cyclical bias in the standard MFPG measure, but the non-parametric approach offers more practical adjustment for capacity utilization, because it is easier to implement and more in line with the non-parametric approach long used by statistical agencies and researchers.

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Paper provided by Statistics Canada, Analytical Studies Branch in its series Economic Analysis (EA) Research Paper Series with number 2013085e.

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Date of creation: 23 Jul 2013
Handle: RePEc:stc:stcp5e:2013085e
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