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June 1991, Vol. 114, No. 6
Edna Falk and Diane Litz
F or almost a decade, the Bureau of Labor Statistics has published a labor productivity measure called output per employee hour for the farm and garden machinery industry. Many factors in addition to changes in the skills and efforts of the work force influence movements in labor productivity: technological change, economies of scale, the amount of capital input per worker, the amount of intermediate purchases input per worker, and other factors. Changes in these factors are reflected in shifts in the labor productivity measure. In this article, we present another measure of productivity for the industry-multifactor productivity-in which output is related to the combined inputs of labor, capital, and intermediate purchases.
The multifactor productivity measure differs from the traditional output-per-hour measure in that it accounts for the influences of capital and intermediate purchases in the input measure and therefore does not reflect the impact of these influences in the productivity residual. It also allows us to separate effects-that is, to quantify the effects on labor productivity of changes in capital relative to labor and the intermediate purchases relative to labor. In the farm and garden machinery industry, there was a significant falloff in labor productivity in the post-1973 period relative to the pre-1973 period. Using results obtained from multifactor productivity calculations, this article examines the role played by the growth of capital and intermediate purchases relative to labor in the labor productivity slowdown after 1973.
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