Estimates Of Productivity Growth Research Articles

Factor prices and productivity growth during the British industrial revolution

This paper presents new estimates of total factor productivity growth in Britain for the period 1770–1860. We use the dual technique and argue that the estimates we derive from factor prices are of similar quality to quantity-based calculations. Our results provide further evidence, calculated on the basis of an independent set of sources, that productivity growth during the British Industrial Revolution was relatively slow. The Crafts–Harley view of the Industrial Revolution is thus reinforced. Our preferred estimates suggest a modest acceleration after 1800.

Pollution abatement and productivity performance of regional Canadian pulp and paper industries

The performance of pulp and paper industries in four Canadian regions is compared based on the estimation of an input distance function, with and without pollutant outputs. Distance functions are techniques for the representation and estimation of multiple-output and multiple-input production technologies. They are quantity-based techniques. Non-marketed outputs such as pollutants can be easily incorporated into productivity analysis with the help of distance functions. This environmentally sensitive approach provides higher productivity growth estimates for all regions, indicating the need for adjusting conventional measures that ignore the non-marketed benefits of pollution abatement activities. The results also consistently indicate the presence of substantial differences in the regional levels of technical efficiency. Regional industries have not enjoyed similar rates of technological progress due to differences in their underlying structures. Productivity growth estimates for most regional industries remain weak or negative even after the recognition of pollution abatement efforts. Estimates of regional level costs of abatement for biological oxygen demand (BOD) and suspended solids (TSS) are provided.

IT adoption costs and productivity:: A reply to Diego Comin

Diego Comin (2002, Review of Economic Dynamics 5 (2)), critiques my paper “Technology adoption costs and productivity growth: The transition to information technology” (2002, Review of Economic Dynamics 5 (2)), concluding that all of my major results are unfounded. I contend, to the contrary, that my results hold up against his criticism. My paper analyzes the effect of investment adjustment costs on subsequent productivity growth for manufacturing industries. I find that adjustment costs increased substantially during the late 70's and early 80's and that this increase is associated with increased investment in information technology. I also estimate the effect of these adjustment costs on BLS productivity growth estimates. This analysis uses two datasets, the NBER–CES Manufacturing Industry Database (Bartelsman and Gray, 1996. NBER Working Paper 205) and the BLS Manufacturing Productivity release of April 2001. For the former I calculate productivity growth using a standard Solow residual; for the latter, I use BLS productivity growth estimates. Comin's critique, however, uses a different measure entirely. He introduces a “corrected TFP” measure that I believe is flawed. Most of his critique uses this measure, rather than the standard productivity growth measures I use. As a consequence, most of his criticism is not actually about my paper, but is, instead, about a paper Comin might have written using his measure. And because this measure is flawed, so is this alternative. In addition, he raises criticism of my evidence of a link between information technology (IT) and adjustment costs and of my corrections to BLS productivity estimates. I present additional evidence to address these concerns and to examine the robustness of my results.

Productivity measurement in Swedish departments of gynecology and obstetrics

The rapid growth of public spending and the need to assess its impact on the welfare system has made the studies of productivity in the public sector an important subject. This paper is concerned with the specification and estimation of total factor productivity growth using the primal panel data approach. The total factor productivity growth is decomposed into technical change and scale components. Several competing models are used to explore whether there are any similarities in the estimates of total factor productivity growth and technical change among these models. The models are estimated using different estimation methods. Some of the models, although assuming a Cobb–Douglas technology, exhibit firm-specific technical change. These models are used to measure productivity growth in departments of gynecology and obstetrics in Sweden. Empirical results show evidence of large and negative rate of productivity growth. In comparison among different specifications proposed, the level and the time pattern of productivity measures vary substantially across models and estimation methods.

What Explains the Industrial Revolution in East Asia? Evidence From the Factor Markets

This paper presents dual estimates of total factor productivity growth (TFPG) for East Asian countries. While the dual estimates of TFPG for Korea and Hong Kong are similar to the primal estimates, they exceed the primal estimates by 1 percent a year for Taiwan and by more than 2 percent for Singapore. The reason for the large discrepancy for Singapore is because the return to capital has remained constant, despite the high rate of capital accumulation indicated by Singapore's national accounts. This discrepancy is not explained by financial market controls, capital income taxes, risk premium changes, and public investment subsidies.

Technology Adoption Costs and Productivity Growth: The Transition to Information Technology

Using two panels of U.S. manufacturing industries, this paper estimates capital adjustment costs from 1961 to 1996. I find that from 1974–1983 adjustment costs rose sharply—they more than doubled from about 3% of output to around 7%. Moreover, this increase is specifically associated with a shift to investment in information technology. But such large adoption costs imply that the Solow residual mismeasures productivity growth: Adoption costs are resource costs representing an unmeasured investment. I find that when this investment is included, productivity grew about 0.4% per annum faster than official measures during the 1970's and early 1980's, reducing the size of the productivity “slowdown.” Indeed, estimated productivity growth rates were roughly the same from 1974–1988 as from 1949–1973. Thus technology transitions critically affect productivity growth measurement. Journal of Economic Literature Classification Numbers: O30, O47, E22.

Greenhouse Gas Emissions and the Productivity Growth of Electricity Generators

Greenhouse Gas Emissions and the Productivity Growth of Electricity Generators by Greg Murtough, David Appels, Anna Matysek, and C. A. Knox Lovell, was released on 18 December 2001. This paper develops and applies a measure of productivity growth that can incorporate unpriced environmental impacts. The methodology builds on the established technique of data envelopment analysis and is applied to one of the more significant environmental issues facing Australia - greenhouse gas emissions from electricity generation. The main finding of the paper is: productivity growth estimates for electricity generators can change significantly when allowance is made for greenhouse gas emissions. The paper develops an innovative statistical technique for incorporating environmental impacts in productivity estimates. It shows that accounting for greenhouse gas emissions reduces estimated productivity growth when emission intensity is rising and increases it when emission intensity is falling. In the late 1990s, changes in emission intensity (and hence the impact of emissions on estimated productivity growth) appear to have been largely driven by movements in thermal efficiency (electricity supplied per unit of fuel). The paper also found that there are regional differences in the cost (in terms of foregone output of electricity) of abating emissions. The views expressed in this paper are those of the staff involved and do not necessarily reflect those of the Productivity Commission.

Stochastic estimation of firm technology, inefficiency, and productivity growth using shadow cost and distance functions

It is well-known that a firm's technology, allocative efficiency, technical efficiency, and productivity growth can be estimated using a shadow cost system, comprised of a shadow cost function and its share equations, whose arguments are outputs and shadow input prices (prices internal to the firm). We provide a dual characterization to estimate these measures using a shadow distance system. This system is comprised of a shadow distance function, expressed in terms of shadow input quantities and output quantities, plus the first-order conditions from the cost-minimization problem. An advantage of the distance system over the cost system is that we obtain direct estimates of input inefficiency with the former, but indirect estimates with the latter. We also show how to express cost function derivatives in terms of distance function derivatives, which allows calculation of returns to scale and price elasticities of demand from the estimated distance system. Using panel data on US electric utilities, we estimate both systems and find a strong similarity between their associated measures.

Greenhouse Gas Emissions and the Productivity Growth of Electricity Generators

This paper analyses electricity generation in four Australian states and the Northern Territory in the late 1990s. It finds that productivity growth estimates for electricity generators can change significantly when allowance is made for greenhouse gas emissions. Using an innovative analytical technique for incorporating environmental impacts in productivity estimates, it shows that productivity growth is overestimated when emission intensity is rising and underestimated when emission intensity is falling. This is because emissions are undesirable and so if they fall (grow) per unit of output then this will tend to increase (decrease) estimated productivity.

Productivity growth in European railways: a new approach

The paper develops a model to represent the cost structure of European railways based on a general index of technical change, which allows completely general estimation of productivity growth. The estimated model is based on a variable cost function for panel data, which allows for heterogeneity in spite of previous approaches in the railway economics and general index model literature which adopt the assumption of common technical parameters across countries.

Long-run technical change and multifactor productivity growth in US manufacturing

This study utilizes a translog cost function to produce econometric estimates of the separate influences of technical change versus scale efficiency in contributing to multifactor productivity growth within the US manufacturing sector. The analysis generates (two-digit) industry-specific parameters that capture the effects of output versus time-related shifts in the cost function over the 1949–1991 period. Thus initial evidence concerning the relative importance of technical progress (versus ‘scale’) cannot be provided as a source of productivity gains within two-digit industries. The parametric estimates of total factor productivity growth are compared with existing Divisia measures to explore the shortcomings of the growth accounting technique. These long-run patterns hold implications for the productivity convergence hypothesis traced to knowledge spillovers between industries.

Long-run technical change and multifactor productivity growth in US manufacturing

This study utilizes a translog cost function to produce econometric estimates of the separate influences of technical change versus scale efficiency in contributing to multifactor productivity growth within the US manufacturing sector. The analysis generates (two-digit) industry-specific parameters that capture the effects of output versus time-related shifts in the cost function over the 1949–1991 period. Thus initial evidence concerning the relative importance of technical progress (versus ‘scale’) cannot be provided as a source of productivity gains within two-digit industries. The parametric estimates of total factor productivity growth are compared with existing Divisia measures to explore the shortcomings of the growth accounting technique. These long-run patterns hold implications for the productivity convergence hypothesis traced to knowledge spillovers between industries.

Productivity and Price Performance in the Privatized Water and Sewerage Companies of England and Wales

After its privatization in 1989, the water and sewerage industry of England and Wales faced a new regulatory regime and implemented a substantial capital investment program aimed at improving water and environmental standards. A new RPI + K regulatory pricing system was designed to compensate the industry for its increased capital costs, encourage increased efficiency, and maintain fair prices for customers. This paper evaluates how successful privatization and the resulting system of economic regulation has been. Estimates of productivity growth, derived with quality adjusted output indices, suggest that despite reductions in labor usage, total factor productivity growth has not improved since privatization. Moreover, total price performance indices reveal that increases in output prices have outstripped increases in input costs, a trend which is largely responsible for the increase in economic profits that has occurred since privatization. * We would like to thank Emmanuel Thanassoulis, Joshy Easaw, Jim Love, John Sawkins, and an anonymous referee for helpful comments on earlier drafts of this paper. The usual disclaimer applies.

Is China's economic growth sustainable? A productivity analysis

Since the initiative of economic reform in the late 1970s, the Chinese economy has sustained a continuously high rate of annual growth. This seemingly miraculous growth has attracted the attention of many economists in the world. In particular, major efforts have been made to examine the role of efficiency and productivity in economic growth in the postreform mainland Chinese economy and hence, to understand whether China's economic growth is sustainable or not. However, most previous studies have focused only on the industrial or agricultural sectors, perhaps due to the limitation of statistics. This paper presents an economy-wide study and hence attempts to fill the void in the literature. A stochastic frontier method is used to estimate productivity growth, which is decomposed into two components: technological progress and efficiency change. The former refers to shifts in the frontier and the latter to movement towards the frontier. Applying the newly released regional GDP data, this study aims to: (1) examine the contribution of productivity to economic growth in China, (2) investigate the sources of productivity growth in the reforming Chinese economy, and (3) shed some light on the trend of convergence and catch-up in terms of productivity performance among China's regional economies in the 1980s and 1990s.

Productivity Growth During the English Industrial Revolution: A Dual Approach

This paper presents new estimates of total factor productivity growth in Britain for the period 1770-1860. We use a dual technique recently popularized by Hsieh (1999), and argue that the estimates we derive from factor prices are of similar quality to quantity-based calculations. Our results provide further evidence, derived from this independent set of sources, that productivity growth during the British Industrial Revolution was relatively slow. During the years 1770-1800, TFP growth was close to zero, according to our estimates. The period 1800-1830 experienced an acceleration of productivity growth. The Crafts-Harley view of the Industrial Revolution is thus reinforced. We also consider alternative explanations of slow productivity growth, and reject the interpretation that focuses on the introduction of steam as a general purpose technology.

How did bank holding companies prosper in the 1990s?

This paper examines the improved performance of US bank holding companies (BHCs) from 1991 to 1997. Analysis of cost and profit functions using several alternative output specifications suggests that the gains were primarily due to productivity growth and changes in scale economies. Various econometric methodologies yield productivity growth of about 0.4% per year and the optimal size seems to have increased in the 1990s era of deregulation, technological change, and financial innovation. Estimates of both productivity growth and economies of scale are robust across traditional and non-traditional output specifications. Despite the overall success, however, substantial cost and profit inefficiency existed for BHCs of all sizes in the 1990s. These efficiency estimates are particularly sensitive to the output specification and failure to account for non-traditional activities like off-balance sheet (OBS) items leads profit efficiency, but not cost efficiency, to be understated for the largest BHCs.

Estimation of firm-specific technological bias, technical change and total factor productivity growth: a dual approach

This paper deals with modeling firm-specific technical change (TC), and technological biases (inputs and scale) in estimating total factor productivity (TFP) growth. Several dual parametric econometric models are used for this purpose. We examine robustness of TFP growth and TC among competing models. These models include the traditional time trend (TT) model and the general index (GI) model. The TT and the GI models are generalized to accommodate firm-specific TC and technological bias (in inputs and output). Both nested and non-nested tests are used to select the appropriate models. Firm-level panel data from the Japanese chemical industry during 1968- 1987 is used as an application.

COMPETITION AND PRODUCTIVITY GROWTH: THE CASE OF THE U.S. TELEPHONE INDUSTRY

The article focuses on the relation of competition to changes in productivity. Specifically, it compares the experience of AT&T Long Lines, operating in an increasingly competitive market, with that of eight local telephone monopolies. Both the estimation of total factor productivity growth and the analysis of shifts in cost functions show a markedly faster change in efficiency in the effectively competitive market than for the local monopolies. The article also examines three channels through which competition produces differential changes in efficiency. The results support, by implication, a policy of permitting entry and increasing competition in local telephone markets. (JEL L11, L96)

Changes in utilization and productivity in a deregulating economy

This paper provides an estimate of the production cost of losses in official working hours and of utilization-adjusted productivity growth using robust methods on a panel of industry-region data for Indian manufacturing in the 1980s. Time losses such as arise on account of power cuts and materials shortages appear to have cost the economy a sixth of its potential manufacturing output in 1979. Concomitant with deregulation and increased public investment in infrastructure in the 1980s, there was a significant recuperation of lost time. Although this contributed 25% of the observed acceleration in output, it has escaped notice so far. Recognizing the increase in factor utilization produces more modest estimates of productivity growth and casts doubt on its sustainability.

ACCOUNTING FOR EXHAUSTIBLE RESOURCES IN THE CANADIAN SYSTEM OF NATIONAL ACCOUNTS: FLOWS, STOCKS AND PRODUCTIVITY MEASURES

The paper shows that the Canadian System of National Accounts includes exhaustible resources but treats them as if they were produced goods. Thus, the claim that conventional accounts ignore the contribution of exhaustible natural resources is partly true. To fully account for exhaustible resources, we present an alternative national accounting framework that incorporates natural resource flows and stocks. The framework modifies the measure of the net domestic product by a factor that differs from the Hartwick‐Solow‐Weitzman rule and leads to different estimates of GDP, national wealth, and productivity growth. An application to the Canadian oil and gas industry shows order‐of‐magnitude effects.