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New Developments in Productivity Analysis$
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Charles R. Hulten, Edwin R. Dean, and Michael Harper

Print publication date: 2001

Print ISBN-13: 9780226360621

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226360645.001.0001

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Why Is Productivity Procyclical? Why Do We Care?

Why Is Productivity Procyclical? Why Do We Care?

Chapter:
(p.225) 7 Why Is Productivity Procyclical? Why Do We Care?
Source:
New Developments in Productivity Analysis
Author(s):
Susanto Basu, John Fernald
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226360645.003.0007

This chapter takes up another theoretical issue that has challenged productivity analysis: the problem of short-run procyclical productivity fluctuations. Conventional analysis regards these fluctuations as a nuisance that obscures long-run movements in total factor productivity (also referred to as multifactor productivity). The chapter treats them as potentially interesting macroeconomic variables that need to be understood in their own rights. Several competing explanations are studied, including procyclical technology shocks, the effects of imperfect competition with increasing returns to scale, variable utilization of inputs over the business cycle, and resource reallocations over the cycle. A commentary is also included at the end of the chapter.

Keywords:   productivity analysis, business cycle, total factor productivity, multifactor productivity

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