The distribution approach to the aggregation of putty-clay production functions

Abstract

The point of departure of the distribution approach is the efficiency distribution of the production units in an industry. From this distribution the full-capacity production function and the short-run aggregate production function of the industry are derived. The long-run production function of the industry then is derived from the full-capacity function and the short-run production function. Hence, in the context of the distribution approach the relation is analysed between the short-run, full-capacity and long-run aggregate production functions of the industry and the efficiency distribution (and related capacity distribution) of the production units in that industry. Finally, the distribution approach is applied for the case of the Japanese cotton spinning industry.