Chapter

Why Is Productivity Procyclical? Why Do We Care?

Edited by Susanto Basu and John Fernald

in New Developments in Productivity Analysis

Published by University of Chicago Press

Published in print August 2001 | ISBN: 9780226360621
Published online February 2013 | e-ISBN: 9780226360645 | DOI: http://dx.doi.org/10.7208/chicago/9780226360645.003.0007
Why Is Productivity Procyclical? Why Do We Care?

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This chapter takes up another theoretical issue that has challenged productivity analysis: the problem of short-run procyclical productivity fluctuations. Conventional analysis regards these fluctuations as a nuisance that obscures long-run movements in total factor productivity (also referred to as multifactor productivity). The chapter treats them as potentially interesting macroeconomic variables that need to be understood in their own rights. Several competing explanations are studied, including procyclical technology shocks, the effects of imperfect competition with increasing returns to scale, variable utilization of inputs over the business cycle, and resource reallocations over the cycle. A commentary is also included at the end of the chapter.

Keywords: productivity analysis; business cycle; total factor productivity; multifactor productivity

Chapter.  33383 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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