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Measuring the shift in the short-run production frontier

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  • Hideyuki Mizobuchi

    (Ryukoku University)

Abstract

We introduce two labour productivity indexes. Both indexes are intended to capture the shift in the short-run production frontier, which can be attributed to technological progress or growth in capital inputs. The two indexes adopt distinct approaches to measuring the distance between the production frontiers. One is based on the distance function and the other is based on the profit function. In the end, we show that these two theoretical measures coincide with the index number formulae that are computable from the observable prices and quantities of output and input. By applying these formulae to the U.S. industry data of the years 1970–2005, we compare newly proposed labour productivity indexes with the average labour productivity growth over periods and across industries. We revisit the hypothesis of Baumol’s disease throughout our observations on the trend of industry labour productivities in the service sector.

Suggested Citation

  • Hideyuki Mizobuchi, 2022. "Measuring the shift in the short-run production frontier," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 271-300, April.
    • Handle: RePEc:spr:eaiere:v:19:y:2022:i:1:d:10.1007_s40844-021-00212-6
    DOI: 10.1007/s40844-021-00212-6
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    Cited by:

    1. Hiroaki Sasaki, 2022. "Special feature: economic dynamics—growth, capital, labor, technology, and money," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 159-167, April.

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    More about this item

    Keywords

    Labour productivity; Index numbers; Malmquist index; Törnqvist index; Output distance function; Input distance function; Baumol’s disease; Service sector;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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