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Real cost reduction and productivity increase in an individual industry: a price-accounting approach in theory and practice

Martina Bisello () and Arrigo Opocher ()

MPRA Paper from University Library of Munich, Germany

Abstract: The inter-industry diversity in productivity increase stimulated many studies on the industrial sources of economic growth. Much less efforts have been devoted to the study of the industrial sources of real income increase. Albeit from the standpoint of the economic system these aspects are two sides of the same coin, one can consistently trace back an observable change in real wages (in terms of a certain output) and in capital compensation to its industrial sources only by using data on prices, wages etc. and by fitting them into a consistent ‘price-accounting’ scheme of the industry. The conceptual framework presented in this paper is centered around the notion of ‘Real Cost Reduction’, its breakdown into components, and its outcome in terms of increasing labour and capital compensations. We also provide an illustration of the data sets required, of the qualitative results that can be obtained, and of some practical problems that need to be solved in order to extend the analysis and to compare its quantitative results with those of conventional industrial TFP analysis.

Keywords: Productivity increase; real cost reduction; industry; Total Factor Productivity; real wages (search for similar items in EconPapers)
JEL-codes: D2 D24 D33 (search for similar items in EconPapers)
Date: 2013-07-16
New Economics Papers: this item is included in nep-eff
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