Factor Adjustment, Quality Change, and Productivity Growth for U.S. Manufacturing

44 Pages Posted: 24 May 1999 Last revised: 17 Oct 2022

See all articles by Jeffrey I. Bernstein

Jeffrey I. Bernstein

Carleton University - Department of Economics; National Bureau of Economic Research (NBER)

Theofanis P. Mamuneas

University of Cyprus - Department of Economics

Panos Pashardes

University of Cyprus - Department of Economics

Date Written: January 1999

Abstract

This paper accounts for quality improvements and adjustment costs in all inputs to U.S. manufacturing production. Adjustment processes for non-capital inputs are slower than previously recognized. Annual adjustment percentages are: labor 77, capital 30, energy 20, and materials 21. Factor prices should be adjusted for quality improvements to reflect higher marginal products. The percentage increases in marginal products from quality improvements are: labor 0.25, capital 0.30, energy 2.13, and materials 0.92. Observed input growth should be adjusted for quality improvements. Unadjusted input growth causes efficiency-based productivity growth rates to exceed observed productivity growth in the slowdown period of 1974 - 1995.

Suggested Citation

Bernstein, Jeffrey I. and Mamuneas, Theofanis P. and Pashardes, Panos, Factor Adjustment, Quality Change, and Productivity Growth for U.S. Manufacturing (January 1999). NBER Working Paper No. w6877, Available at SSRN: https://ssrn.com/abstract=146930

Jeffrey I. Bernstein (Contact Author)

Carleton University - Department of Economics ( email )

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Theofanis P. Mamuneas

University of Cyprus - Department of Economics ( email )

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Panos Pashardes

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus