Productivity measurement with non-static expectations and varying capacity utilization (Q1085030)

This article focuses attention on the implications for multifactor productivity measurement of increasing marginal adjustment costs for quasi-fixed inputs. A dynamic optimization model of an imperfectly competitive firm producing at a point of long-run non-constant returns to scale with increasing marginal adjustment costs on quasi-fixed inputs and non-static expectations provides a framework to capture variations in utilization, anticipating behavior and costs of adjustment as well as the effects of non-constant returns to scale on productivity growth. The resulting framework is applied to study the productivity growth in the U.S. manufacturing sector, 1947-1979.