Factor market competition including energy input in the US economy

Cassandra Copeland and Henry Thompson

Applied Economics, 2022, vol. 54, issue 31, 3557-3566

Abstract: This paper examines factor market competition in the US economy with quarterly 1973–2013 data for fixed capital assets, labour force, and energy Btu input. The translog production function is estimated directly to avoid the assumption of competitive pricing in factor share equations. Error correction estimates on yearly percentage changes for the difference stationary series are consistent with Hicks neutral technology. Capital is underpaid relative to marginal product. Energy is also underpaid and has an upward trending marginal product. In stark contrast, labour is overpaid relative to downward trending marginal product. Non-Competitive pricing due to binding quantity constraints characterize these factor markets.

Date: 2022
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DOI: 10.1080/00036846.2020.1855311

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