Melvyn A. Fuss

The demand for energy in Canadian manufacturing: An example of the estimation of production structures with many inputs

Abstract A model is presented for the estimation of production structures with many inputs when aggregation into a small number of aggregate inputs is undesirable. The procedure utilized is one of two-stage optimization, valid under the assumption of homothetic separability. A unique feature is the use of duality theory to integrate the two stages through the generation in the first stage of an instrumental variable for the aggregate price index of the separable disaggregated factors. The conceptual model is then applied to an analysis of the demand for energy in Canadian manufacturing, in which six energy components are explicitly included in the set of factors of production.

Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium

Abstract One of the most persistent puzzles addressed by recent productivity research is the substantial decline in measured productivity growth during the 1970s. In this paper we trace a substantial part of the measured decline to the fact that traditional methods of productivity measurement assume that producers are in long-run equilibrium when in fact they may be in short-run or temporary equilibrium. We utilize the Marshallian framework of a short-run production or cost function with certain inputs quasi-fixed to provide a theoretical basis for accounting for temporary equilibrium. Within this theoretical framework it is the value of services from stocks of quasi-fixed inputs which should be altered rather than the quantity. The empirical application to U.S. manufacturing data 1958–81 shows that, depending on the measurement procedure, one can attribute somewhere between 18% and 65% of the traditionally measured decline in TFP growth between 1965–73 and 1973–81 to the effects of temporary equilibrium.

The Determinants of Success in University Introductory Economics Courses

Performance in and propensity to complete the college introductory economics courses are shown to be related to student preparation and performance in high school, with calculus and overall grade average being especially important.

A general approach to intertemporal and interspatial productivity comparisons

Abstract The purpose of this paper is to introduce a general methodology for analysing the sources of intertemporal or interspatial differences in outputs and costs, general in the sense that our methodology allows the productivity analyst to ‘break out’ of the quadratic ‘straightjacket’ imposed by the class of superlative index number comparisons. Starting fromTaylors series expansions about the two points to be compared, we develop a general growth accounting equation which can be approximated to any desired degree of accuracy, depending on the information available. The theoretical framework is applied to two recent examples of interspatial comparisons which use the Tornqvist superlative index. In the first example, we show that the biases in regional Canadian total manufacturing cost-efficiency comparisons which result from the use of this index are negligible. However, in the second example, it is shown that the Tornqvist index imparts a substantial bias in United States-Japan total domestic economy productivity comparisons. The index consistently overestimates the relative productivitylevel of the U.S. economy and misses the turning point, when the Japanese economy becomes more efficient, by two years.

The Effects of Factor Prices and Technological Change on the Occupational Demand for Labor: Evidence from Canadian Telecommunications.

This paper investigates the effect of automation on the occupational demand for labor using modern econometric demand theory. We are able to estimate labor demand functions derived from a production process characterized by variable elasticities of substitution, nonhomothetic output expansion effects, and nonneutral technical change. The model is applied to a large Canadian telecommunications firm, Bell Canada, for the period 1952-1972 when detailed data on four occupational groups, capital, materials, output, and the extent of automation are available. Our empirical results demonstrate the strong effects of innovative activity in this industry. Technical change was capital-using and labor-saving, with the labor-saving impact being felt most severely by the least skilled occupations.

Productivity in Manufacturing Industries, Canada, Japan and the United States, 1953-1986: Was the 'Productivity Slowdown' Reversed?

This paper analyzes total factor productivity growth and trends in relative efficiency levels in the national Two-Digit Manufacturing industries of Japan, Canada, and the United States during the last quarter-century. The well-known slowdown in productivity growth rates in the 1973-80 period was a common phenomenon across the three countries but was felt most strongly in Japan and least in Canada. While the 1980s saw a pick-up in productivity growth over the slowdown period, growth in productivity has not returned to the pre-1973 level. The productivity slowdown and any subsequent increase in productivity growth rates have been correlated across industries in the three countries to a very high degree.

A cost function approach to the estimation of minimum efficient scale, returns to scale, and suboptimal capacity : With an application to Canadian manufacturing

Abstract This paper presents a new method for utilizing the statistical cost technique to measure minimum efficient scale (MES), returns to scale and suboptimal capacity. An application of the duality theory between cost and homothetic production functions leads to justification for ignoring poor quality or unavailable capital data and the pooling of several years observations to improve the efficiency of the estimates. The methodology is applied to 91 four-digit Canadian manufacturing industries to obtain estimates of MES, returns to scale, and suboptimal capacity. For a subsample of industries, we demonstrate that the cost function estimates of MES and returns to scale are more closely related to engineering estimates than are the ad hoc estimates usually found in the industrial organization literature.

Factor Substitution in Electricity Generation: A Test of the Putty-Clay Hypothesis

Publisher Summary This chapter presents an example of the empirical usefulness of the basic model and provides evidence in support of the hypothesis that the putty-clay model is the most appropriate one for steam-electric power generation. This hypothesis has remained in dispute despite the large number of production function studies which have utilized data drawn from the electricity generation industry. The chapter presents a summary of the ex ante - ex post model of production. The basic model is simplified and specialized so that it can be applied to data drawn from a sample of pooled cross-section and time series observations on steam-electric generating plants. The chapter also presents the results of testing the structure and estimates of the underlying production parameters and substitution characteristics for the nonrejected structure. Efficiency in the electricity generation industry is characterized by higher temperature and pressure conditions which decrease the demand for fuel per unit of output.

High tech and productivity: Evidence from Israeli industrial firms

Abstract The main purpose of this study is to characterize and analyze high technology industrial firms. A technology index is constructed and used to classify firms. The largest concentration of hightech firms is Israel is found in electronics and transport equipment industries, and the lowest in textiles and clothing. High-tech firms appear to be more productive, more export-oriented, pay higher wages, and earn higher rates of return than low-tech firms. The fact that high-tech firms in Israel are export-oriented is shown to be consistent with the international trade theories of comparative advantage and strategic rent-seeking.

Productivity Growth in Canadian Telecommunications

Canadian telecommunications firms do not price proportionately to marginal cost. The prices of toll services tend to be above marginal costs, whereas the prices of basic local services are typically set below marginal costs by regulators. In such circumstances, estimates of TFP growth using the conventional Tornqvist (Divisia) formula which weights outputs by revenue shares in determining the rate of growth of aggregate output is theoretically incorrect and needs to be replaced by a formula which uses cost elasticity weights. Empirically, the conventional Tornqvist index yields a very distorted picture of efficiency gains in the two largest Canadian telephone companies during the 1980s. For Bell Canada, I calculate the upward bias to be approximately 75 percent over the period 1980-89 and 80 percent over the period 1985-89. For B.C. Tel a similar calculation yields an upward bias of 37 percent over the period 1980-89 and 48 percent over the period 1985-89.