The Positive Sum Strategy Harnessing Technology for Economic Growth (1986) / Chapter Skim
Currently Skimming:
Microeconomics and Productivity
Microeconomics and Productivity
Pages 57-76
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 57... ...
economy is a decline in the rate of productivity growth. This decline can be traced to the staggering increases in energy prices since 1973.
|
From page 58... ...
It will not be necessary to have a tax increase. Retuming to historical experience, a 4 percent growth rate occurred in two of the seven postwar business cycles.
|
From page 59... ...
Growth in labor input reflects expansion in employment, hours worked per employee, and the upgrading of the labor force through greater education and experience. Productivity grown is defined as the residual between the growth of output and the contributions of capital and labor inputs.
|
From page 60... ...
60 ~ C~ _ _ C~ ~o _ _ ~o C~ _ _ o C~ C~ _ _ C~ oo 1 X o o o o X ~ ~ oo _ _ _ t_ t_ \O e' _ o — o o o o o o o .
|
From page 62... ...
In order to obtain additional perspective on the interrelationships between productivity and economic growth, it is useful to look at developments outside the United States. Rapid economic growth in the industrialized countries through 1973 has resulted in unprecedented levels of world economic prospenty.
|
From page 63... ...
Second, there is the reallocation of value added among sectors, and, finally, there are the reallocations of capital and labor inputs among industrial sectors. The first question to ask is: What is the meaning of productivity grown at We sectoral level and how does it compare with productivity grounds at We aggregate level?
|
From page 64... ...
The idea of productivity grown at the sectoral level is much closer to the engineering concept of efficiency and is a much easier concept to appreciate at an intuitive level. In Table 1 we see that the sectoral rates of productivity growth account for almost all of the aggregate productivity grown, at least if we concentrate on the postwar period as a whole.
|
From page 65... ...
For each industry the model of production is based on a sectoral price function that summarizes both possibilities for substitution among inputs and patterns of productivity grown. Each price function gives the price of output of the corresponding industrial sector as a function of the prices of capital, labor, electricity, nonelectrical energy, and materials inputs and time, where time represents the level of productivity in the sector.3 Obviously, an increase in the price of one of the inputs, holding the prices of the other inputs and He level of productivity constant, necessitates an increase in the price of output.
|
From page 66... ...
The resulting equation is an econometric model of sectoral productivity growth.5 Like any econometric model, the relationships determining the value shares of capital, labor, electricity, nonelectrical energy, and materials inputs and the rate of productivity growth involve unknown parameters that must be estimated from data for the individual industries. Included among these unknown parameters are biases of productivity growth that indicate the effect of change in the level of productivity on the value shares of each of the five inputs.
|
From page 67... ...
MICROECONOMICS AND PROD UCTIV17Y TAME 2 Classification of Tousles by Bides of ~~Uchvi~ Grow Pattern of Biases Capital-using Labor-using Electncity-using Non-electncal-energy-using Materials-saving Capital-using Labor-saving El ectoc ity - us ing Non-electrical-energy-using M aten al s -us ing 67 Industries Tobacco, textiles, apparel, lumber and wood, printing and publishing, fabricated metal, motor vehicles, transportation Capital-using Labor-using Electncity-using Non -electucal-energy-saving Materials-saving Capital-using Labor-using Electricity-saving Non -electrical -energy- using Matenals-saving Capital-using Labor-saving Electncity-using Non-electucal -energy - saving Materials-using Capital-using Labor-using Electncity-saving Non-electnc al -energy- saviD g Matenals-saving Capital-using Labor-saving Electucity-saving Non-electucal-energy-using Matenals-saving Capital-saving I=bor-using Elecmcity-using Non~lectrical~energy-using Materials-using Capital-saving Labor-using Electncity-using Non-electacal-energy-using Matenals-saving Electrical machinery Metal mining, services Nonmetallic mining, miscellaneous rnanufactunng, gove~nment enterprises Construction Coal niining, trade Agnculture, crude petroleum and natural gas, petroleum refining Food, paper Rubber; leather, instruments; gas utilides; finance, insurance, and real estate Continued on next page
|
From page 68... ...
For this pattern Me rate of productivity grown decreases win We prices of labor, electncity, and nonelectrical energy inputs and increases win the prices of capital and materials inputs. These two patterns Of productivity grown differ only in the role of Me price of capital input.
|
From page 69... ...
Next, we can examine the role of prices of labor, electricity, nonelectrical energy, and materials inputs in the determination of tile rate of productivity grown. Productivity growth is labor-using for 26 of the 35 industries included in the table and labor-saving for 9 of the industries.
|
From page 70... ...
The effective tax rates for all corporate investment for each year of the period 1948 to 1979 are listed in Table 3, along with effective tax rates for structures and for equipment separately. If capital-consumption allowances were precisely equal to economic depreciation and the investment tax credit were equal to zero for all assets, the effective tax rate would be the same for all assets and equal to the statutory tax rate.
|
From page 71... ...
These tax rates can be compared with the statutory rate of 48 percent in both years. The increases in the rate of inflation
|
From page 72... ...
Effective tax rates declined sharply between 1960 and 1966; Me rate Productivity growth attained its postwar peak of 1.80 percent during this penod. Effective tax rates rose dramatically from 1966 to 1969; the rate of productivity grown declined to 0.08 percent per year dming this period.
|
From page 73... ...
This helps to account for We high productivity growth of the period 1960 to 1966, the slow grown of the following penod, 1966 to 1969, and the revival of productivity grown during the period preceding the first oil crisis, 1969 to 1973. From 1960 to 1966 tax policy stimulated productivity grown; from 1966 to 1969 tax policy retarded productivity grown; and from 1969 to 1973 tax policy again acted as a stimulus to productivity grown.
|
From page 74... ...
Moreover, the prospects for increasing productivity grown and capital formation by means of tax policy appear to be very remote. I come down on the side of the Congressional Budget Office There seems to be little doubt Hat one should be pessimistic about future U.S.
|
From page 75... ...
7. Compansons of energy prices and energy demand patterns in industrialized countries are given by Fujime (1983)
|
From page 76... ...
1984. The role of energy in productivity grown.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.