Unraveling the Productivity Growth Slowdown in the United States, Canada and Japan: The Effects of Subequilibrium, Scale Economies and Markups

Catherine Morrison Paul

The Review of Economics and Statistics, 1992, vol. 74, issue 3, 381-93

Abstract: Measures of productivity growth typically include in the productivity "residual" the impacts of fixity of factors (subequilibrium), costs of adjustment, returns to scale and markups. This paper proposes a general framework for adjusting the residual to accommodate these impacts, by first correcting and then decomposing traditional measures. Use of the framework is illustrated empirically for the United States, Japanese and Canadian manufacturing sectors, using an econometric model that allows explicit incorporation and measurement of these factors. The adjusted measures show that a significant amount of cyclical and secular change in measured productivity growth can be attributed to production characteristics other than technical change, particularly scale effects. Copyright 1992 by MIT Press.

Date: 1992
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