Studies in Productivity Analysis – serie

swollen with deutschemarks and yen newly created to purchase unwanted dollars from the markets. When the Bundesbank and the Bank of Japan began to raise their interest rates to slow domestic monetary expansion, the fabric of international monetary cooperation began to unravel. Amid charge and counter-charge by disgruntled fmance ministers, the dollar dropped further and interest rates jumped upward, leading to panic in the stock market on Black Monday. Fortunately, a steady hand and generous supply of credit from the Federal Reserve System prevented massive bankruptcies among Wall Street brokerage houses and a collapse of the credit system. But the world-wide reverberations of the Wall Street crash exposed the underlying weaknesses of an economy based on foreign borrowing for all to see. Furthermore, the banking system is saddled with mountains of bad debts from the Third World and depressed parts of the American economy. A new Administration entering office in 1989 must deal with these problems, among others. Businesses and state and local governments need to know whether to focus their efforts on tax policy, investment, and improvements in education and worker training, or lobbying for protection from imports. The papers in this volume were chosen to explain the causes of present competitive problems in American industry and the factors that can lead to their gradual solution.

1 Ali Dogramaci and Nabil R. Adam 1.1. OVERVIEW With the decline of U.S. productivity growth, interest has surged to under­ stand the behavior of productivity measures through time, the conceptual foundations of productivity analysis, and the linkage between productivity performance and other major forces in the economy. The purpose of this volume is to present a brief overview of some of the concepts used in aggre­ gate and industry-level productivity analyses and the results of some of the recent research in this field. The book is divided into three parts. Part I covers some of the methodo­ logical approaches used in aggregate and industry-level productivity studies. Part II deals with the movement of labor productivity measures through time. The papers in this part of the book study productivity changes as uni­ variate time series and analyze some of the characteristics of the patterns displayed. The papers in Part III address the issues of measurement of capi­ tal, the relation of capital formation to productivity growth, and the rela­ tion of imported intermediate inputs to U.S. productivity performance.

1 Nabil R. Adam and Ali Dogramaci Measuring, analyzing, and improving productivity in a given organization is a complex process that involves the contributions of economists, industrial engineers, operations researchers, management scientists, and lawyers. The objective of this book is to provide the reader with a sample of original papers that relate to these productivity topics at the organizational level. In the book, the word organization refers to business firms and municipal organizations. The hook is divided into three parts: perspectives on productivity mea­ surement, a range of studies at the micro level, and some productivity issues in public organizations. Part I, which consists of three chapters, deals with productivity measurement. The first two chapters of this part cover a broad framework of measurement concepts and techniques; the last chapter, on the other hand, provides the reader with an example of productivity measurement for a specific industry (in this case, food retail­ ing). Thus, a spectrum of productivity measurement issues is covered in this part of the book.

A. Dogramaci and N.R. Adam Productivity of a firm is influenced both by economic forces which act at the macro level and impose themselves on the individual firm as well as internal factors that result from decisions and processes which take place within the boundaries of the firm. Efforts towards increasing the produc­ tivity level of firms need to be based on a sound understanding of how the above processes take place. Our objective in this volume is to present some of the recent research work in this field. The volume consists of three parts. In part I, two macro issues are addressed (taxation and inflation) and their relation to produc­ tivity is analyzed. The second part of the volume focuses on methods for productivity analysis within the firm. Finally, the third part of the book deals with two additional productivity analysis techniques and their applications to public utilities. The objective of the volume is not to present a unified point of view, but rather to cover a sample of different methodologies and perspectives through original, scholarly papers.

This book presents a set of papers from the leading edge of current research on productivity analysis. The focus is on alternative forms of measurement, methods, and their implications. The book begins with a chapter by V. Corbo and J. de Melo comparing the effects of using different production frontier models for measuring technical efficiency when using census data. The second chapter (by H. Pesaran and R. Tarling) is a detailed analysi·s of measurement of labor and its variations over time. The next two chapters concern the measurement of capital. The first of these is written by M. F. Mohr; the second is by B. M. Fraumeni and D. W. Jorgenson. The final chapter is by I. B. Kravis, A. W. Heston, and R. Summers and concerns the behavior of productivity and service prices. Decisions for improving productivity rely upon explicit as well as implicit assumptions on how productivity is related to a variety of factors. Determining the right relationships hinges on how these factors are measured and how the models are set. This is why better understanding of measurement issues and behavior of variables related to productivity can lead more effective policies. We plan to continue in this series to present the current research of major different schools of thought in the field.

1 Ali Dogramaci and Nabil R. Adam 1.1. OVERVIEW With the decline of U.S. productivity growth, interest has surged to under­ stand the behavior of productivity measures through time, the conceptual foundations of productivity analysis, and the linkage between productivity performance and other major forces in the economy. The purpose of this volume is to present a brief overview of some of the concepts used in aggre­ gate and industry-level productivity analyses and the results of some of the recent research in this field. The book is divided into three parts. Part I covers some of the methodo­ logical approaches used in aggregate and industry-level productivity studies. Part II deals with the movement of labor productivity measures through time. The papers in this part of the book study productivity changes as uni­ variate time series and analyze some of the characteristics of the patterns displayed. The papers in Part III address the issues of measurement of capi­ tal, the relation of capital formation to productivity growth, and the rela­ tion of imported intermediate inputs to U.S. productivity performance.

1 Nabil R. Adam and Ali Dogramaci Measuring, analyzing, and improving productivity in a given organization is a complex process that involves the contributions of economists, industrial engineers, operations researchers, management scientists, and lawyers. The objective of this book is to provide the reader with a sample of original papers that relate to these productivity topics at the organizational level. In the book, the word organization refers to business firms and municipal organizations. The hook is divided into three parts: perspectives on productivity mea­ surement, a range of studies at the micro level, and some productivity issues in public organizations. Part I, which consists of three chapters, deals with productivity measurement. The first two chapters of this part cover a broad framework of measurement concepts and techniques; the last chapter, on the other hand, provides the reader with an example of productivity measurement for a specific industry (in this case, food retail­ ing). Thus, a spectrum of productivity measurement issues is covered in this part of the book.

swollen with deutschemarks and yen newly created to purchase unwanted dollars from the markets. When the Bundesbank and the Bank of Japan began to raise their interest rates to slow domestic monetary expansion, the fabric of international monetary cooperation began to unravel. Amid charge and counter-charge by disgruntled fmance ministers, the dollar dropped further and interest rates jumped upward, leading to panic in the stock market on Black Monday. Fortunately, a steady hand and generous supply of credit from the Federal Reserve System prevented massive bankruptcies among Wall Street brokerage houses and a collapse of the credit system. But the world-wide reverberations of the Wall Street crash exposed the underlying weaknesses of an economy based on foreign borrowing for all to see. Furthermore, the banking system is saddled with mountains of bad debts from the Third World and depressed parts of the American economy. A new Administration entering office in 1989 must deal with these problems, among others. Businesses and state and local governments need to know whether to focus their efforts on tax policy, investment, and improvements in education and worker training, or lobbying for protection from imports. The papers in this volume were chosen to explain the causes of present competitive problems in American industry and the factors that can lead to their gradual solution.

A. Dogramaci and N.R. Adam Productivity of a firm is influenced both by economic forces which act at the macro level and impose themselves on the individual firm as well as internal factors that result from decisions and processes which take place within the boundaries of the firm. Efforts towards increasing the produc­ tivity level of firms need to be based on a sound understanding of how the above processes take place. Our objective in this volume is to present some of the recent research work in this field. The volume consists of three parts. In part I, two macro issues are addressed (taxation and inflation) and their relation to produc­ tivity is analyzed. The second part of the volume focuses on methods for productivity analysis within the firm. Finally, the third part of the book deals with two additional productivity analysis techniques and their applications to public utilities. The objective of the volume is not to present a unified point of view, but rather to cover a sample of different methodologies and perspectives through original, scholarly papers.

There is a wide variety of perspectives for productivity analysis. The back­ grounds of different researchers and practitioners who work on this topic include such fields as economics, business administration, and industrial engineering, among others. Within each such field, there are different schools of thought on the theory and application of productivity analysis. Often it is not difficult to observe a lack of communication among the advocates of these separate schools. The purpose of this book is to present in a single volume samples of alternative approaches to productivity analy­ sis. This may be considered as a first step toward a better communication among practitioners and researchers in the fields of management, industrial engineering, and economics. The focus of the book is on the United States, where the productivity growth problem has been acute for some time. The book begins with a brief overview chapter that covers some of the issues involved in productivity analysis and a sample of methodological ap­ proaches presently in use. After this introduction, we move to Chapter 2 where Solomon Fabricant presents the issues related to measurement and analysis at the macroeconomic level. In Chapter 3, C. Lowell Harriss discusses concepts that he considers es­ sential for productivity growth: capital formation, technological progress, and freedom.

Realization of productivity gains is a necessary condition for long-term consistent improvement in economic well being. We have to work smarter and produce more efficiently to attain an ever higher quantity and quality of goods and services without sacrificing leisure. This is true for the economy at large as well as for individual firms. In a competitive environment, businesses must continuously improve the productivity of their operations in order to sustain and augment profitability and growth. This basic requirement may be temporarily obscured by unexpected external developments or financial manipulations, but it is nevertheless essential to the long-term health of any economic enterprise. Increasing awareness of the importance of productivity has recently motivated renewed interest in the development and refinement of productivity-based management techniques. The purpose of this book is to review and evaluate some of the new contributions in this area. The analysis of productivity-based management in this book encompasses planning, decision making and control methods which explicitly incorporate techniques designed to measure, monitor, induce and improve underlying productivity performance in production, financial planning, marketing and international operations. These productivity-based methods can easily accommodate built-in efficiency incentives designed to motivate people vii viii PRODUCTIVITY BASED MANAGEMENT working in decentralized organizations toward goal congruent behavior. It is argued throughout the book that productivity-based management, at its best, is likely to improve significantly the efficiency and effectiveness of economic enterprises.