Martin Neil Baily

The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power

No abstract is available for this paper.

Some aspects of optimal unemployment insurance

*The original version of this paper was written for the Office of ASPER of the U.S. Department of Labor in 1975. This is a revision of ‘Unemployment insurance as a social insurance program’ presented at the ISPE Conference on Social Insurance held near Tokyo. Japan in May 1977. I would like to thank participants at this conference, M.A. Baily, G.S. Fields and the referees for helpful comments. My recent work on this topic has been funded by the National Science Foundation.

Downsizing and Productivity Growth: Myth or Reality?

The conventional wisdom is that the rising productivity in the U.S. manufacturing sector in the 1980s has been driven by the apparently pervasive downsizing over this period. Aggregate evidence clearly shows falling employment accompanying the rise in productivity. In this paper, we examine the microeconomic evidence using the plant level data from the Longitudinal Research Database (LRD). In contrast to the conventional wisdom, we find that plants that increased employment as well as productivity contribute almost as much to overall productivity growth in the 1980s as the plants that increased productivity at the expense of employment. Further, there are striking differences by sector (defined by industry, size, region, wages, and ownership type) in the allocation of plants in terms of whether they upsize or downsize and whether they increase or decrease productivity. Nevertheless, in spite of the striking differences across sectors defined in a variety of ways, most of the variance of productivity and employment growth is accounted for by idiosyncratic factors.

Labor Productivity: Structural Change and Cyclical Dynamics

A longstanding issue in empirical economics is the behavior of average labor productivity over the business cycle. This paper provides new insights into the cyclicality of aggregate labor productivity by examining the cyclical behavior of productivity at the plant level as well as the role of reallocation across plants over the cycle. We find that plant-level productivity is even more procyclical than aggregate productivity, because short-run reallocation yields a countercyclical contribution to labor productivity. At the plant level, we find that cyclicality of productivity varies systematically with long-run employment growth. Over the course of the cycle, plants that are long-run downsizers exhibit significantly greater procyclicality of productivity than do long-run upsizers. When we control for the direction of a cyclical shock, we find that the fall in productivity from an adverse cyclical shock for long-run downsizers is significantly larger in magnitude than is the fall in productivity from an equivalent adverse cyclical shock for long-run upsizers. We argue that these findings raise questions about one of the most popular explanations of procyclical productivity: changing factor utilization over the cycle.

An econometric model of the world copper industry

This paper discusses a complete model of the world copper economy. Supply equations for primary copper are estimated for four principal producing countries and the rest of the world; demand equations are estimated for the United States, Europe, Japan, and the Rest-of-World. Scrap supply equations are estimated for the U.S. and non-U.S. sectors as are price adjustment equations. The model is closed with a net input equation for the United States and various identities. The two separate copper markets (U.S. and non-U.S.) are converted by inputs, the generally free London Metal Exchange and scrap markets, and the price-setting behavior of U.S. producers. The copper market is found to be characterized by low short-run but very high long-run price elasticities, making for considerable sensitivity to exogenous forces. The model, fitted to 1948-1969 data, is used for forecasting and simulation experiments. Generally, short-run forecasts are good and longer-run forecasts are not very satisfactory. Perhaps the most interesting finding of the simulation is the prediction that Chilean output would be very sluggish even in the absence of nationalization and that Chilean revenues would be substantially increased were the Chilean government to increase domestic mine production and to allow world prices to adjust accordingly.

What Has Happened to Productivity Growth

The collapse of U.S. productivity growth is the most severe and persistent of recent economic problems. Unless there is an increase in growth, American living standards will remain stagnant and problems such as the budget deficit will plaque policy-makers. Why has this happened? Among the important reasons are a failure to innovate, changing demographics, and disruptions to the economy, including oil price increases and inflation.

Unemployment Insurance as Insurance for Workers

Discusses the application of unemployment insurance (UI) as an insurance policy for workers. Impact of UI on unemployment; Basic model optimal insurance; Details of UI tax and benefit rates. (Abstract copyright EBSCO.)

Health Care Productivity

IN ALL OF THE INDUSTRIAL COUNTRIES, a high fraction of gross domestic product (GDP), ranging from approximately 7 percent in the United Kingdom to 14 percent in the United States, is devoted to health care. In recent years policymakers have been forced to try to trim health care benefits or other social services, and the health care systems of almost all the industrial countries have come under significant pressure to control expenditures and improve performance. Although each nations health care system operates with a mixture of regulation and market mechanisms, there are great differences among them. And these differences suggest that policymakers could learn important lessons by comparing performances across countries. Thus far, however, no single system is recognized as being the most productive or as having achieved the right blend of competition and regulation. No system provides the paradigm for others. Some observers of the U.S. health care system argue that aggregate data indicate poor performance. Figure 1 shows aggregate spending data for Germany, the United Kingdom, and the United States; with the highest level of GDP and the largest fraction of spending, the United States spends much more per capita on health than the other two countries. Figure 2 provides a simple aggregate performance measure. Average life expectancy at birth in the United States is lower than in Germany and the United Kingdom, although, as the figure also shows,

The Productivity of Capital in a Period of Slower Growth

THE UNITED STATES has invested a smaller fraction of its gross national product in capital goods than almost any of its major international competitors in the 40 years since 1948. Over this same period, average labor productivity growth in the United States has also been among the slowest. For the first 25 years of the period there was little cause for dissatisfaction. U.S. productivity growth was higher than it was in the prewar years, and the still higher rates in Europe could easily be explained as a catch-up phenomenon. But after 1973 U.S. labor productivity growth fell to only a little more than 1 percent a year, and in the past five years net investment has dropped substantially. Many people have argued that increasing the level of physical investment in the U.S. economy would have a large payout in higher productivity growth. We agree that investment should be increased, but we suspect that the potential productivity improvements are being exaggerated. The issue is important both for economic analysis and for economic policy. If the growth payoff from increasing the capital stock is large, economic policy can concentrate on raising national saving and investment. If the payoff is small, the nation would be wise to bend some of its efforts toward other means of improving productivity growth. From the perspective of economic analysis, we want to know how to

The Productivity Growth Slowdown by Industry

LABOR productivity growth for the private economy as a whole seems to have stopped altogether. In the first half of 1982 the U.S. Bureau of Labor Statistics index of private sector labor productivity was below its 1977 level. Productivity has stagnated for five years. Weak aggregate demand has been an ingredient in this stagnation, but cannot account for much of it. Even in the 1930s there was only a four-year stagnation of productivity accompanying a much more severe fall in demand. By 1934, productivity was above its 1929 level. This paper is part of a continuing research project to understand and explain the slowdown. In earlier work I looked at the aggregate picture. I In this paper I report on the behavior of productivity at the industry level-the major industry groups and the two-digit manufacturing industries. In future work I will analyze the behavior of individual firms and establishments. The paper focuses on the following questions. (1) Does the incidence of the productivity slowdown by industry suggest that capital services have declined relative to the capital stock? (2) Does it suggest that the rate of technical change has slowed? (3) Have responses to the increased cost of energy been a major cause of the slowdown? (4) Have changes