TY  - JOUR
AU  - Berndt,Ernst R.
AU  - Fuss,Melvyn A.
TI  - Productivity Measurement Using Capital Asset Valuation to Adjust for Variations in Utilization
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 895
PY  - 1982
Y2  - May 1982
UR  - http://www.nber.org/papers/w0895
L1  - http://www.nber.org/papers/w0895.pdf
N1  - Author contact info:
Ernst R. Berndt
MIT Sloan School of Management
100 Main Street, E62-518
Cambridge, MA 02142
Tel: 617/253-2665
Fax: 617-227-0880
E-Mail: eberndt@mit.edu

Melvyn A. Fuss
Department of Economics
University of Toronto
150 Saint George Street
Toronto, ON  M5S 3G7  CANADA
Tel: 416/978-1494
Fax: 416/978-6713
E-Mail: FUSS@CHASS.UTORONTO.CA
AB  - Although a great deal of empirical research on productivity measuremant has taken place in the last decade, one issue remaining particudarly controversial and deaisive is the manner by which one adjusts the productivity residual for variations in capital and capacity utilization. In this paper we use the Marshallian framework of a short run production or cost function with certain inputs quasi-fixed to provide a theoretical basis for accounting for variations in utilization. The theoretical model implies that the value of services from stocks of quasi-fixed inputs should be altered rather than their quantity. This represents a departure from most previous procedures that have adjusted the quantity of capital services for variations in utilization. In the empirical illustration, we employ Tobin's q to measure the shadow value of capital, and find that for the U.S. manufacturing sector, we can attribute about 50% of the traditionally measured decline in productivity growth during 1973-77 to a decline in capacity utilization. Hence, adjusted for utilization, the 1973-77 productivity slowdown in U.S. manufacturing is considerably less than that measured using traditional productivity accounting techniques.
ER  -