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There has been considerable controversy over the apparent slowdown in
productivity growth in Britain and elsewhere from 1973-80, and the
apparent acceleration in British productivity growth over 1980-83. In
Discussion Paper No. 32 Lionel Mendis and CEPR Research Fellow John
Muellbauer examine these developments by means of an aggregate
production function for British manufacturing, estimated on quarterly
data for 1956- 83. This makes it possible to distinguish cyclical
movements in productivity caused by variations in labour utilization
from underlying trends. Their measure of labour utilization rests on
information on weekly hours of overtime work as a fraction of the normal
work week. Mendis and Muellbauer also consider problems in the
measurement of output, for which several observable proxies are
available. Errors in the measurement of the capital stock are proxied by
shifts in time trends. Mendis and Muellbauer compare their utilization
measure with the CBI's capacity utilization data, and Bennett and Smith-Gavine's
"Percentage Utilization of Labour' index. Estimates are provided of
measurement biases in output and comparisons made between crude output
per head and a productivity measure corrected for variations in
utilization and measurement biases in output. |