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May 1985, Vol. 108, No. 5
Changing utilization of fixed capital:
an element in long-term growth
The workweek of labor has gone down since the early part of this century, but what can be said about the "workweek" of fixed capitalthat is, the number of hours per week that factories, retail stores, coal mines, and the like were utilized? According to estimates based on data from the Bureau of the Census, the Bureau of Labor Statistics, and other sources, the workweek of fixed capital in the nonfarm business sector increased from the late 1920's to the 1970's. Manufacturing plants in 1976 were in operation approximately 25 percent more hours per week than they were in 1929. In some nonmanufacturing industriesservices and constructionaverage weekly hours of capital fell, but in others they roseretail and wholesale trade, radio and TV broadcasting, and mining. An important part of the business stock of fixed capital experienced no changes in its weekly hours of operationelectric and gas utilities, telephone companies, and most transportation companiesbecause it tends to operate around the clock. These findings can help our understanding of the long-run growth of productivity and output, especially in light of what important investigations have told us about long-term growth. For example, it has been found that output has risen much faster than the weighted sum of all inputs or factors of production. This difference is a reflection of the growth of multifactor, or total factor, productivity. According to four major studies, productivity growth was an important part of output growth from 1948 to 1973: 32 percent as estimated by Dale Jorgenson; 54 percent by BLS; 56 percent by Edward Denison; and 62 percent by John Kendrick.1 The pattern observed for the entire private economy has been apparent also for major industry divisions like manufacturing, for major manufacturing industries, and for earlier periods.
Economists disagree about what lies behind the long-run growth in productivity. They have given many different designationsbesides multifactor productivityto the difference between measured output growth and input growth, such as "technical progress" or the "residual." But whatever the name, economists have been disturbed that they have known so little about so large a part of output growth. Indeed, Moses Abramovitz, referring to this phenomenon almost 30 years ago, declared that the residual could be taken as "a measure of our ignorance about he causes of economic growth."2 In presenting its new estimates of multifactor productivity in September 1983, BLS felt constrained to use the same characterization.
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1 Trends in Multifactor Productivity, 1948-81, Bulletin 2178 (Bureau of Labor Statistics, 1983), pp. 73-80.
2 Moses Abramovitz, Resource and Output Trends in the United States Since 1870 (New York, National Bureau of Economic Research, 1956), p. 10.
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