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October 1994

Manufacturing costs, productivity, and competitiveness, 1979-93

Edwin Dean, Mark K. Sherwood

With unit labor costs as a gauge, U.S. competitiveness within the G-7 countries improved in the last decade and a half. A fuller story regarding competitiveness could be told using multifactor productivity and all input costs. This article examines the relationship that exists among productivity, costs, and prices, illustrating it with data produced by the Bureau of Labor Statistics. The first half of the article studies the relationship using the traditional measures of unit labor costs, labor compensation per hour, and labor productivity. The second half examines the more general concepts of unit total costs, output prices, prices of all inputs, and multifactor productivity and relates these concepts to competitiveness.

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