Mizobuchi, Hideyuki (2011): The returns to scale effect in labour productivity growth.
Download (469Kb) | Preview
Labour productivity is defined as output per unit of labour input. Economists acknowledge that technical progress as well as growth in capital inputs increases labour productivity. However, little attention has been paid to the fact that changes in labour input alone could also impact labour productivity. Since this effect disappears for the constant returns to scale short-run production frontier, we call it the returns to scale effect. We decompose the growth in labour productivity into two components: 1) the joint effect of technical progress and capital input growth, and 2) the returns to scale effect. We propose theoretical measures for these two components and show that they coincide with the index number formulae consisting of prices and quantities of inputs and outputs. We then apply the results of our decomposition to U.S. industry data for 1987–2007. It is acknowledged that labour productivity in the services industries grows much more slowly than in the goods industries. We conclude that the returns to scale effect can explain a large part of the gap in labour productivity growth between the two industry groups.
|Item Type:||MPRA Paper|
|Original Title:||The returns to scale effect in labour productivity growth|
|Keywords:||Labour productivity, index numbers, Malmquist index, Törnqvist index, output distance function, input distance function|
|Subjects:||O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O51 - U.S.; Canada
D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
|Depositing User:||Hideyuki Mizobuchi|
|Date Deposited:||27. May 2011 13:02|
|Last Modified:||16. Feb 2013 02:07|
Balk, B.M. (2001), “Scale Efficiency and Productivity Change”, Journal of Productivity Analysis 15, 159-183.
Bosworth, B.P. and J.E. Triplett (2007), “The Early 21st Century U.S. Productivity Expansion is Still in Services”, International Productivity Monitor 14, 3-19.
Caves, D.W., L. Christensen and W.E. Diewert (1982), “The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity”, Econometrica 50, 1393-1414.
Chambers, R.G. (1988), Applied Production Analysis: A Dual Approach, New York: Cambridge University Press.
Council of Economic Advisors (2010), Economic Report of the President, Washington, D.C.: U.S. Government Printing Office.
Diewert, W.E. and C.J. Morrison (1986), “Adjusting Output and Productivity Indexes for Changes in the Terms of Trade”, Economic Journal 96, 659-679.
Diewert, W.E. and A.O. Nakamura (2007), “The Measurement of Productivity for Nations”, in J.J. Heckman and E.E. Leamer (ed.), Handbook of Econometrics, Vol. 6, Chapter 66, Amsterdam: Elsevier, pp. 4501-4586.
Fare, R., S. Grosskopf, M. Norris and Z. Zhang (1994), “Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries”, American Economic Review 84, 66-83.
Fisher, I. (1922), The Making of Index Numbers, Boston: Houghton-Mifflin.
Griliches, Z. (1987), “Productivity: Measurement Problems”, in J. Eatwell, M. Milgate and P. Newman (ed.), The New Palgrave: A Dictionary of Economics. New York: McMillan, pp. 1010-1013.
Hall, R.E., and C.I. Jones (1999). “Why Do Some Countries Produce So Much More Output per Worker than Others?”, Quarterly Journal of Economics 114, 83-116.
Hotelling, H. (1932), “Edgeworth’s Taxation Paradox and the Nature of Demand and Supply Functions”, Journal of Political Economy 40, 577-616.
Jones, C.I. (2002), “Sources of U.S. Economic Growth in a World of Idea”, American Economic Review 92, 220-239.
Jorgenson, D.W. and K.J. Stiroh (2000), “Raising the Speed Limit: U.S. Economic Growth in the Information Age”, Brookings Papers on Economic Activity 2, 125-211.
Lovell, C. A. K. (2003), “The Decomposition of Malmquist Productivity Indexes”, Journal of Productivity Analysis 20, 437-458.
Nemoto, J., and M. Goto (2005), “Productivity, Efficiency, Scale Economies and Technical Change: A New Decomposition Analysis of TFP Applied to the Japanese Prefectures”, Journal of Japanese and International Economies 19, 617-634.
Nishimizu, M., and J.M. Page (1982), “Total Factor Productivity Growth, Technical Progress and Technical Efficiency Change: Dimensions of Productivity Change in Yugoslavia, 1965-78”, Economic Journal 92, 920-936.
Triplett, J.E. and B.P. Bosworth (2004), Services Productivity in the United States: New Sources of Economic Growth, Washington, D.C.: Brookings Institution Press.
Triplett, J.E. and B.P. Bosworth (2006), “‘Baumol’s Disease’ Has Been Cured: IT and Multi-factor Productivity in U.S. Services Industries”, The New Economy and Beyond: Past, Present, and Future. Dennis W. Jansen, (eds.), Cheltenham: Edgar Elgar, pp. 34-71.