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Measuring productivity in an imperfect world

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  • Aklilu Zegeye
  • Larry Rosenblum

Abstract

Most measures of multifactor productivity (MFP) assume constant returns to scale and perfect competition. Using a general aggregate production function together with duality theory and allowing for the possibilities of disequilibrium, markups and economies of scale, the study derives a more generalized MFP measure. The model was used to assess the economic performance in US manufacturing for the 1949 to 1988 period. The results suggest that scale and markups have substantial power in explaining MFP growth for all periods and that half of the measured MFP growth (as measured within the conventional framework) comes from biases due to scale economies, market power, and interaction effects.

Suggested Citation

  • Aklilu Zegeye & Larry Rosenblum, 2000. "Measuring productivity in an imperfect world," Applied Economics, Taylor & Francis Journals, vol. 32(1), pages 91-104.
    • Handle: RePEc:taf:applec:v:32:y:2000:i:1:p:91-104
    DOI: 10.1080/000368400323010
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    References listed on IDEAS

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    1. Melvyn A. Fuss & Leonard Waverman, 1986. "The Extent and Sources of Cost and Efficiency Differences Between U.S. and Japanese Automobile Producers," NBER Working Papers 1849, National Bureau of Economic Research, Inc.
    2. John W. Kendrick, 1973. "Postwar Productivity Trends in the United States, 1948–1969," NBER Books, National Bureau of Economic Research, Inc, number kend73-1.
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    Cited by:

    1. Katarzyna Budnik & Michal Greszta & Michal Hulej & Marcin Kolasa & Karol Murawski & Michal Rot & Bartosz Rybaczyk & Magdalena Tarnicka, 2009. "The new macroeconometric model of the Polish economy," NBP Working Papers 62, Narodowy Bank Polski.
    2. Azzeddine Azzam & Rigoberto Lopez & Elena Lopez, 2004. "Imperfect Competition and Total Factor Productivity Growth," Journal of Productivity Analysis, Springer, vol. 22(3), pages 173-184, November.

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