The returns to scale effect in labour productivity growth

Hideyuki Mizobuchi

MPRA Paper from University Library of Munich, Germany

Abstract: Labour productivity is defined as output per unit of labour input. Economists acknowledge that technical progress as well as growth in capital inputs increases labour productivity. However, little attention has been paid to the fact that changes in labour input alone could also impact labour productivity. Since this effect disappears for the constant returns to scale short-run production frontier, we call it the returns to scale effect. We decompose the growth in labour productivity into two components: 1) the joint effect of technical progress and capital input growth, and 2) the returns to scale effect. We propose theoretical measures for these two components and show that they coincide with the index number formulae consisting of prices and quantities of inputs and outputs. We then apply the results of our decomposition to U.S. industry data for 1987–2007. It is acknowledged that labour productivity in the services industries grows much more slowly than in the goods industries. We conclude that the returns to scale effect can explain a large part of the gap in labour productivity growth between the two industry groups.

Keywords: Labour productivity; index numbers; Malmquist index; Törnqvist index; output distance function; input distance function (search for similar items in EconPapers)
JEL-codes: C14 D24 O47 O51 (search for similar items in EconPapers)
Date: 2011-05-27
New Economics Papers: this item is included in nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/31152/1/MPRA_paper_31152.pdf original version (application/pdf)

Related works:
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:pra:mprapa:31152

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().