Measurement and Interpretation of Productivity (1979) / Chapter Skim
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6 The Measurment of Inputs
6 The Measurment of Inputs
Pages 122-145
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From page 122... ...
This chapter examines three types of tangible inputs: labor, physical capital including land, and intermediate inputs, and also includes a brief final section on combining these factors to construct measures of multi-factor productivity. Intangible inputs, which include such factors as technology and economies of scale and which are generally harder to measure, are discussed in the next chapter.
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From page 123... ...
Number of Workers The employment component of present official productivity measures is probably the best measured major component. Employment data come largely from the current employment statistics (CES)
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From page 124... ...
For hours, unlike employment, the accuracy of CES data is not checked against a benchmark. Hours of nonproduction workers in manufacturing and mining and of supervisory workers elsewhere are estimated by various assumptions.
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From page 125... ...
The Panel recommends that the Bureau of Labor Statistics develop an annual supplement to the current employment statistics (CES) program requesting data on the actual hours of nonproduction and supervisory workers.
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From page 126... ...
Many private researchers, on the other hand, have weighted labor inputs in various ways to reflect differences in kinds of labor. The case for the use of weighted rather than unweighted labor input data in productivity measurement can be made in several ways.
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From page 127... ...
The components of measures of capital stock are therefore always combined with value weights, and this weighting carries over into measures of the flows of services that capital provides. This observation suggests a third reason for the weighting of labor inputs in measures of multi-factor productivity, namely, that there will then be greater conceptual consistency between the measures of labor and capital inputs.
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From page 128... ...
Such weighted productivity measures should be considered as complements to, rather than replacements for, the unweighted measures now published. It should be noted that BES has a comparative advantage over private investigators in making estimates of weighted labor inputs since most of the data used for weighting are from BES sources.
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From page 129... ...
In practice, the real capital stock is measured either by converting book values to base-period prices through deflation by an appropriate price index or by cumulating real investment and subtracting either retirements to obtain real gross stocks or real capital depreciation to obtain real net stocks. Real capital stock can be adjusted for changes in rates of utilization to reflect the actual flow of capital services (the question of whether or not this adjustment is desirable is discussed below)
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From page 130... ...
Thus if total labor compensation is deflated by average hourly compensation, the quotient reflects the change in hours worked. Analogously, capital compensation may be deflated by an index of the average rental price of capital goods, and the quotient reflects changes in real capital hours used.
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From page 131... ...
Some economists have suggested going further and making quality adjustments based on the change in the output-producing capacity of the new model of the capital good (see Chapter 5~. However, Denison pointed out long ago that if capital is measured in terms of its output-producing capacity, the output/capital ratio becomes an uninteresting statistic, since it will tend to show no change between years of comparable rates of capacity utilization and no change in all years if the real capital stock is adjusted for changing utilization rates.
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From page 132... ...
Since productivity has to do with the relationship of output (not net income) to inputs, a considerable body of expert opinion favors basing measures of inputs of capital services on estimates of real gross stocks, or some variant of them, rather than on real net capital stocks.
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From page 133... ...
18-22) notes, there are thus practical as well as theoretical reasons for not adjusting real capital estimates for changing rates of utilization.
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From page 134... ...
When the data relate to book values, it is necessary first to determine the reporters' methods of inventory accounting and then revalue to current and constant prices accordingly. This is the procedure used by the Bureau of Economic Analysis for measuring inventories in the nonfarm sector by industry, although the basic data need improvement.
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From page 135... ...
If the real capital stock estimates are the basis for capital input estimates, the rental payments can be capitalized and the capital shifted from the lessor to the using industry Otherwise, the real rental payments can be shifted and added to the real cost (input) of the owned capital used in the several industries or sectors.
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From page 136... ...
, while the capital compensation reflects the rental prices of the capital services. There are two major questions regarding real capital input: What are the significant categories of capital stocks and services that should be distinguished?
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From page 137... ...
Gollop and Jorgenson compute capital input estimates for sectors by weighting proportionate changes in their indexes of real capital stocks by industry (cross-classified by asset class and legal form of organization) by the average share of each component in sectoral property compensation in
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From page 138... ...
When the real capital input estimates are divided back into the gross capital compensation estimates in current prices, an implicit index of rental price emerges. This index reflects changes in the prices of tangible capital assets; changes in rates of returns on assets (which can be separated into the after-tax rate of return and the average income tax rate)
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From page 139... ...
for improving the investment estimates and expanding and strengthening the price indexes for producers durable equipment and new construction are directly relevant for improvement of the capital estimates. In addition, current information on the economic lives of capital goods and their decline in efficiency with time would be desirable, not only to improve estimates of the capital stock but also to assist in estimating gross flows of capital inputs from stocks of assets of different kinds.
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From page 140... ...
The Panel recommends that government agencies make use of available estimates of real capital stocks to develop ratios of output per unit of capital in order to determine the savings that have been achieved over time in physical capital per unit of output. INTERMEDIATE INPUTS Intermediate inputs are purchases of goods and services by one firm or industry from another.
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From page 141... ...
A productivity ratio with gross output in the numerator and with labor and capital in the denominator is biased downward if the use of real intermediate inputs is falling relative to other inputs, and it is biased upward if their use is rising.5 In a study of the four industries that manufacture primary paper products, Myers and Nakamura (in this volume) made estimates of real
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From page 142... ...
The most complete source of information on intermediate inputs is the quinquennial economic censuses compiled by the Census Bureau. Establishments are asked to report their consumption of materials and energy by detailed categories in physical units and current-dollar values, although for some portion of materials, such as those not classified by kind, the Census Bureau only reports the dollar value.
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From page 143... ...
Recommendation 12. The Panel recommends that the Census Bureau in its periodic reports on real gross output for detailed industries based on successive quinquennial censuses, include estimates of the real amount of intermediate purchases of materials, including energy, for those detailed industry categories for which data are available.
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From page 144... ...
These annual estimates, which might be made by BEA, the Census Bureau, or private researchers, would give a clearer indication of what is happening in the economy as the result of changes in material prices or other changes between census years. There is nothing comparable to the Annual Survey of Manufactures (ASM)
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From page 145... ...
5. A labor productivity ratio with gross output in the numerator would also be biased when the use of intermediate inputs is changing.
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