1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Fixed Cost, Imperfect Competition and Bias in Technology Measurement

Japan and The United States

In many industries, competition is far from perfect and managerial efficiency (or a fixed cost) varies among firms. However, traditional measurement of technological progress assumes perfect competition and no fixed cost. This paper incorporates these two factors in the technological-progress measurement and investigates the biases caused by their omission. We show that if capital growth exceeds non-capital-input growth and that firms earn a positive pure profit, then traditional measurement underestimates the true technological progress. We apply this methodology to Japanese and US industries, and find that imperfect competition and managerial efficiency are important. However, the magnitude of the bias is not large ...

English

Keywords: managerial efficiency, Japanese and US Industries, imperfect competition, fixed cost, technological progress
JEL: D43: Microeconomics / Market Structure, Pricing, and Design / Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection; O33: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Technological Change: Choices and Consequences; Diffusion Processes; L11: Industrial Organization / Market Structure, Firm Strategy, and Market Performance / Production, Pricing, and Market Structure; Size Distribution of Firms; O47: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence; D24: Microeconomics / Production and Organizations / Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity; O30: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Innovation; Research and Development; Technological Change; Intellectual Property Rights: General; D20: Microeconomics / Production and Organizations / Production and Organizations: General; O53: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: Asia including Middle East; O51: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: U.S.; Canada; L16: Industrial Organization / Market Structure, Firm Strategy, and Market Performance / Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error