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June 1989, Vol. 112, No. 6
Multifactor productivity in tires and inner tubes industry
Diane Litz and Linda Moore
Many factors influence movements in labor productivity, such as technological change, changes in the skills and efforts of the work force, economies of scale, and the amount of capital input per worker and intermediate purchases input per worker. For many years, the Bureau of Labor Statistics has published a labor productivity measure for the tires and inner tubes industry as measured by output per employee hour. This article presents a supplementary productivity measure for the tires and inner tubes industrymultifactor productivityin which output is related to the combined inputs of labor, capital, and intermediate purchases. Multifactor productivity differs from the traditional 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.
Output per employee hour in the tires and inner tubes industry experienced substantial growth during the 1958-86 period, averaging 3.2 percent per year, as output increased 2.4 percent, while hours dropped 0.8 percent per year. For the manufacturing sector as a whole, the average rate of increase in output per employee hour was 2.5 percent.
Output per employee hour can be described as the sum of the effects of changes in capital and intermediate purchases inputs relative to labor and changes in multifactor productivity. (See table 1.) The influence of capital on output per employee hour will be referred to as the "capital effect" and is measured as the change in the capital-labor ratio multiplied by the share of capital income in total output. Similarly, the influence of intermediate purchases on output per employee hour will be referred to as the "intermediate purchases effect" and is measured as the change in the intermediate purchases labor ratio multiplied by the share of intermediate purchases in total output. Multifactor productivity growth accounted for 1.7 percentage points of the 3.2 percent gain in output per employee hour, while the intermediate purchases effect accounted for 1. 1 percentage points and the capital effect for 0.4 percentage point over the 1958-86 period. The 1.7 percentage points growth in multifactor productivity (or output per unit of combined inputs) reflected a 2.4-percent growth in output, while combined inputs increased at an average rate of 0.7 percent.
This excerpt is from an article published in the June 1989 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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Multifactor productivity: cotton and synthetic broadwoven fabrics.July 1995.
Multifactor productivity in the metal stampings industry.May 1995.
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