Procyclical Productivity: Increasing Returns or Cyclical Utilization?

Susanto Basu

No 5336, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: It has long been argued that cyclical fluctuations in labor and capital utilization and the presence of overhead labor and capital are important for explaining procyclical productivity. Here I present two simple and direct tests of these hypotheses, and a way of measuring the relative importance of these two explanations. The intuition behind the paper is that materials input is likely to be measured with less cyclical error than labor and capital input, and materials are likely to be used in strict proportion to value added. In that case, materials growth provides a good measure of the unobserved changes in capital and labor input. Using this measure, I find that the true growth of variable labor and capital inputs is, on average, almost twice the measured change in the capital stock or labor hours. More than half of that is caused by the presence of overhead inputs in production; the rest is due to cyclical factor utilization.

JEL-codes: E2 E3 (search for similar items in EconPapers)
Date: 1995-11
Note: EFG ME
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Quarterly Journal of Economics, vol. 111, no. 3, pp. 719-751, August 1996.

Downloads: (external link)
http://www.nber.org/papers/w5336.pdf (application/pdf)

Related works:
Journal Article: Procyclical Productivity: Increasing Returns or Cyclical Utilization? (1996)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:5336

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w5336

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().