Question

In: Economics

Head to www.bls.gov and select Multifactor Productivity from the Subject drop-down menu. Scroll down and select...

Head to www.bls.gov and select Multifactor Productivity from the Subject drop-down menu. Scroll down and select the PDF version of the

Multifactor productivity decreases 0.2% in 2016, first decline since 2009..  

1. What has been the general trend for multi-factor productivity in the U.S. over the past 15 years?

2. What does this trend suggest has happened to production functions in the U.S.?

3. Assuming this change in productivity has happened to all firms, how will this change in productivity affect cost curves?

Solutions

Expert Solution

The bls.gov site has now revised estimates and averages of multifactor productivity change until 2017. The 0.2% decline in 2016 has been revised to a 0.6% decline. The document under "MFP News Release" is now titled, "Multifactor productivity increases 0.9% in 2017, following a 0.6% decrease in 2016". The article mentioned in the question is not available on the bls.gov website. Questions can be answered using this new data.

1. Multifactor productivity in private non-farm business sector grew at an annual average rate of 1.4% between 2000 and 2007 and 0.5 percent between 2007 and 2017. Multifactor productivy has been growing, with a few years of declining productivity, over the past 15 years. This is also visible in the first graph in the document.

2. Production functions have been shifting upwards/outwards, that is for same combination of inputs, now production is more.

3. If this change in productivity has happended to all firms, it will shift cost curves downwards, indicating lower costs per unit of output.

Rahul Sunny answered 2 years ago
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