Measurement and Interpretation of Productivity (1979) / Chapter Skim
Currently Skimming:
7 Analyzing the Sources of Growth
7 Analyzing the Sources of Growth
Pages 146-165
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 146... ...
The latter is what is called productivity growth. When a complex phenomenon has multiple causes, as the growth of output does, there is usually no unique way of decomposing it and attributing portions of the phenomenon to particular causes.
|
From page 147... ...
This measure is usually derived from cross-sectional differences in hourly wages at a point in time among workers with differing educational attainments. In a perfectly competitive labor market, such differences reflect the marginal productivity of schooling.
|
From page 148... ...
It should be noted that a shift of resources that raises output per unit of labor will not necessarily raise output per unit of all inputs. It is widely believed that one of the most important sources of productivity change is the growth of knowledge, including both the growth of scientific and technological knowledge and improvements in methods of organization and management.
|
From page 149... ...
d Improvements in resource allocation within firmed Changes in cost of "business services to government"e Changes in aspects of the legal and human environment within which business must operate that affect costs of productionf Changes in the intensity with which employed resources are used that result from fluctuations in the pressure of demand" Changes in irregular factors such as weather and strikes h Changes in the extent to which the use of multiple labor shifts permits economizing in the use of capitals Changes in productive efficiency independent of changes in any of the other determinantsJ SOURCE: Denison, E
|
From page 150... ...
eChanges in the Cost of "Business Services to Government": Changes in the cost of "business services to government," such as collecting taxes or filing statistical reports, and changes in the adequacy of "government services to business," such as provision of law courts or roads for business use. This determinant can be altered by transferring the costs of functions between busi ness and government.
|
From page 151... ...
We would need to know more about this determinant to identify with any certainty the types of policy that would affect it, but if my surmises are correct they would include intensification of competitive pressures, and policies to improve the selection and training of management and to stimulate the replacement of unsuccessful managers. EMPIRICAL EVIDENCE Empirical evidence on the sources of productivity growth has been generated by two types of research.
|
From page 152... ...
In the most recent penod the rate of productivity growth has fallen below that of the two earlier penods. Our review here is restricted to the penod since World War II.: The main difficulties of measurement and interpretation can be illustrated from a survey of the studies that cover this penod.
|
From page 153... ...
Percent of Total Growth Rate Accounted for Output per labor-hour 3.13 100.0 Inputs 1.00 31.9 Labor composition per labor-hour 0.54 17.3 Capital per labor-hour 0.48 15.3 Land per labor-hour -0.02 -0.6 Output per unit of input 2.14 68.1 Resource allocation 0.37 11.5 Economies of scale 0.5 1 16.3 Irregular factors -0.18 -5.7 Residual 1.44 46.0 Numbers may not total due to rounding. aIn the nonresidential business sector.
|
From page 154... ...
It is also clear that a sizable amount of output growth during this period had to be included in the residual. The residual was derived by subtracting from the growth rate in output per unit of input the contribution of those sources of productivity growth that Denison was able to measure.
|
From page 155... ...
One of the principal differences between the two estimates is that Denison is accounting for net output while Jorgenson and Christensen are accounting for gross output.5 196~1977 The analysis for the 1966-1977 period is not as reliable as that for the previous period, partly because of time constraints; careful research using revised data takes time. In addition, the recent period has been marked by rapid inflation, which makes it more difficult to measure correctly the amount of physical capital (including inventories)
|
From page 156... ...
Industry Division194819671977 Private business sector100.0100.0100.0 I arming18.37.04.S Manufacturing29.132.929.4 Mining1.81.11 .: Construction5.26.36.6 Transportation6.24.84.4 Communications1.41.61.7 Utilities1.01.11.1 Wholesale and retail trade21.624.225.7 I inancc, insurance, and real estate3.65.26.4 Services10.413.516.4 Government enterprises1.52.22.2 SOURCE: Derived from unpublished data provided by the Bureau of Labor Statistics.
|
From page 157... ...
. Table 7-7 shows the apparent slowdown in output per labor-hour for more detailed time periods, and separately for the private business sector and the private nonfarm business sector.
|
From page 158... ...
will eventually represent a one-time-only loss in output growth or a permanent shift to a lower growth rate.9 Recent growth accounting analyses by Denison (1978a, 1978b) , Clark (1977)
|
From page 159... ...
The estimate is based on an average annual growth rate in the capital/labor ratio of 2.2 percent in the 1948-1965 period and 2.0 percent in the 1965-1977 period. These rates were derived from BEA timeseries data on the capital stock in constant dollars of firms in the private business sector as defined in Bus productivity estimates (from Norsworthy and Harper 1979~.
|
From page 160... ...
Griliches worked with a data file containing observations on 883 individual manufacturing firms, which accounted for more than 91 percent of all formal industrial R&D conducted in the United States in 1963. The file merges each firm's records from the Census Bureau's economic censuses and annual surveys with data collected by the Census Bureau for the National Science Foundation's survey of R&D expenditures and employees.
|
From page 161... ...
Although these refusals probably bias the sample, the results nevertheless suggest a possible range of outcomes. TABLE 7-9 Characteristics of Selected Innovations Approximate Industry Producing Type of Type of Date of the Innovation Innovation Nature of Innovation User Innovation Primary metals New product New type of metal that reduced Firms Late 1930s cost of appliances Machine tools Control systems Construction Drilling Industrial equipment Paper Thread New product New product New product New product New process New product New product Industrial controls New product Electronics New product Chemicalsa New product New computer controls New type of component New material that cut cost of building Reduced cost of drilling wells New type of drafting New paper product that cut costs of users New type of thread that cut costs of garment makers New mechanism for doors New device that reduced costs of certain video tape operations New product that reduced costs Firms Firms Late 1960s Firms Mid 1960s Firms Firms ~r lrms Firms Firms Firms F
|
From page 162... ...
. many manweeks were spent gathering data concerning each innovation and its ejects from the innovating firm, from firms using the innovation (if it was used by firms)
|
From page 163... ...
so that policy makers can have timely and accurate information on at least the more easily measurable sources of productivity change. Although the existing research on the sources of productivity change provides useful knowledge about the broad patterns of contributions to growth, it tells us relatively little about more detailed aspects and patterns.
|
From page 164... ...
This analysis may not apply precisely to the BES measure, which is for the private business sector.
|
From page 165... ...
estimates that differential trends in capacity utilization during the two periods bias the estimates based on the unadjusted stock data. Although there is probably some effect of differential capacity utilization on the slowdown, it is very difficult to measure, especially in nonmanufacturing sectors.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.