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SECTORAL PRODUCTIVITY GROWTH AND PRICE‐MARGINAL COST MARGINS IN THE INTERMEDIATE GOODS MARKET
Author(s) -
KellyHawke Alison
Publication year - 1997
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.1997.tb00216.x
Subject(s) - economics , marginal cost , productivity , marginal product , intermediate good , production (economics) , aggregate (composite) , microeconomics , perfect competition , econometrics , macroeconomics , materials science , composite material
Models of aggregate productivity growth linked to sectoral models of production typically assume that all intermediate goods markets are perfectly competitive. An econometric analysis reveals that many intermediate goods markets exhibit transactions at prices quite different than marginal cost. Measures of productivity growth that ignore these market imperfections are biased. A measure of the actual magnitude of the bias that emerges under the assumption of equating price to marginal cost is constructed.