Fixed Costs, Imperfect Competition and Bias in Technology Measurement: Japan and the United States
This paper examines the direction and the magnitude of bias in the technological progress measurement caused by imperfect competition and fixed costs. We show that imperfect competition coupled with fixed costs is likely to make the traditional measurement of technological progress biased. The direction of bias depends on the relative magnitude of growth between the capital stocks and non-capital inputs and on whether firms enjoy a pure profit in the long run. We then measure the actual magnitude of this bias by re-estimating sectoral technological progress in Japan and the United States. We obtain three main results. First, Japan as a whole is less competitive and has larger fixed costs than the United States. Internationally competitive sectors in both countries have smaller fixed cots. Second, the bias in the measurement caused by imperfect competition and fixed costs is relatively small because firms' pure profit is close to zero. Third, there is a negative correlation between technological progress and the pure profit in the United States, though there is no correlation in Japan.
|Date of creation:||Nov 2000|
|Contact details of provider:|| Postal: Hongo 7-3-1, Bunkyo-ku, Tokyo 113-0033|
Web page: http://www.cirje.e.u-tokyo.ac.jp/index.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Susanto Basu & John G. Fernald, 1995.
"Aggregate productivity and the productivity of aggregates,"
International Finance Discussion Papers
532, Board of Governors of the Federal Reserve System (U.S.).
- Susanto Basu & John G. Fernald, 1995. "Aggregate Productivity and the Productivity of Aggregates," NBER Working Papers 5382, National Bureau of Economic Research, Inc.
- Susanto Basu, 1996.
"Procyclical Productivity: Increasing Returns or Cyclical Utilization?,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 111(3), pages 719-751.
- Susanto Basu, 1995. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," NBER Working Papers 5336, National Bureau of Economic Research, Inc.
- Young, Alwyn, 1994. "Lessons from the East Asian NICS: A contrarian view," European Economic Review, Elsevier, vol. 38(3-4), pages 964-973, April.
- Nishimura, Kiyohiko G. & Ohkusa, Yasushi & Ariga, Kenn, 1999. "Estimating the mark-up over marginal cost: a panel analysis of Japanese firms 1971-1994," International Journal of Industrial Organization, Elsevier, vol. 17(8), pages 1077-1111, November.
- Flaig, Gebhard & Steiner, Viktor, 1993.
"Searching for the "Productivity Slowdown": Some Surprising Findings from West German Manufacturing,"
The Review of Economics and Statistics,
MIT Press, vol. 75(1), pages 57-65, February.
- Flaig, Gebhard & Steiner, Viktor, 1993. "Searching for the \"productivity slowdown’: some surprising findings from West German manufacturing," Munich Reprints in Economics 20364, University of Munich, Department of Economics.
- 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.).
- Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-283, April.
- Park, Seung-Rok & Kwon, Jene K, 1995. "Rapid Economic Growth with Increasing Returns to Scale and Little or No Productivity Growth," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 332-351, May.
- 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.
- Morrison, Catherine J, 1992. "Unraveling the Productivity Growth Slowdown in the United States, Canada and Japan: The Effects of Subequilibrium, Scale Economies and Markups," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 381-393, August.
- Tsao, Yuan, 1985. "Growth without productivity: Singapore Manufacturing in the 1970s," Journal of Development Economics, Elsevier, vol. 19(1-2), pages 25-38.
When requesting a correction, please mention this item's handle: RePEc:tky:fseres:2000cf97. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CIRJE administrative office)
If references are entirely missing, you can add them using this form.