Effects of imported intermediate inputs on productivity

Monthly Labor Review

Volumn 133, Issue 6, 2010, Pages 3-15

  Eldridge, Lucy P ^a   Harper, Michael J ^a  

^a BUREAU OF LABOR STATISTICS   (United States)

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EID: 77954504265     PISSN: 00981818     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (30)

1. Robert M. Solow, "Technical Change and the Aggregate Production Function," Review of Economics and Statistics, August 1957, pp. 312-20.
2. Annual input-output tables, as well as data on imported intermediate inputs, from the Bureau of Economic Analysis (BEA) are used in the analysis presented
3. See Robert E. Yuskavage, Erich Strassner, and Gabriel W. Medeiros, "Domestic Outsourcing and Imported Inputs in the U.S. Economy: Insights from Integrated Economic Accounts," paper prepared for the World Congress on National Accounts and Economic Performance (Arlington, VA, Bureau of Economic Analysis, May 15, 2008).
4. Allan H. Young and Helen Stone Tice, "An Introduction to National Economic Accounting," Survey of Current Business, March 1985, pp. 59-76.
5. The gross product of general government is the sum of government expenditures on compensation of general government employees and the general government consumption of fixed capital, which measures the services of general government fixed assets. Government expenditures on goods and services purchased from the private sector are not excluded from private business sector output. The gross product of private households is the compensation of paid employees of private households; the gross product of nonprofit institutions serving individuals is the compensation paid to employees of those institutions.
6. This value is measured as the sum of the consumption of fixed capital, indirect business taxes, and interest paid
7. BLS data in this article originate in the multifactor productivity program and cover the private business sector, which differs from the business sector covered by the BLS quarterly labor productivity program in that the former excludes government enterprises. In addition, the multifactor productivity measures are available only on an annual basis.
8. The Current Employment Statistics (CES) survey is an establishment survey whose sample is benchmarked annually to levels based on administrative records of employees covered by State unemployment insurance tax records. Data on employee hours from establishments provide consistency with output data from industries and thus are well suited to producing industry-level measures. CES data on employment and average weekly hours paid for production workers in goods-producing industries and for nonsupervisory workers in service-providing industries are the building blocks of labor input.
9. Information from the BLS National Compensation Survey program is used to construct the ratio of hours worked to hours paid. Prior to 2000, the annual Hours at Work Survey was used.
10. In August 2004, the BLS introduced this new method of constructing estimates of hours for nonproduction and supervisory workers
11. see Lucy P. Eldridge, Marilyn E. Manser, and Phyllis F. Otto, "Alternative measures of supervisory employee hours and productivity growth," Monthly Labor Review, April 2004, pp. 9-28.
12. Employment counts for employees in agricultural services, forestry, and fishing are reported from the BLS QCEW program and are based on administrative records from the unemployment insurance system
13. Additional information concerning data sources and methods of measuring labor composition can be found at www.bls.gov/mfp/mprlabor.pdf and in Labor Composition and U.S. Productivity Growth, 1948-90, Bulletin 2426 (Bureau of Labor Statistics, December 1993).
14. The BLS is investigating the possibility of constructing labor composition estimates for the manufacturing sector productivity measures
15. See "Multifactor Productivity Trends, 2007," news release 09-0302 (Bureau of Labor Statistics, March 25, 2009)
16. A nonprofit adjustment is made to intermediate inputs, but not to imported intermediates, because it is doubtful that nonprofits use a significant amount of imported intermediates. Note, however, that, absent a nonprofit adjustment to imported intermediates, the importance of imports may be slightly overstated.
17. Erich H. Strassner, Robert E. Yuskavage, and Jennifer Lee, "Imported Inputs and Industry Contributions to Economic Growth: An Assessment of Alternative Approaches," paper presented at the Conference on Measurement Issues Arising from the Growth of Globalization, Washington, DC, Nov. 6-7, 2009.
18. This study uses International Transaction Account data from the BEA to assess the import comparability assumption. The authors find that real imported materials may be understated in the annual input-output accounts. However, they indicate that the assumption provides reasonable results at the aggregate level.
19. In another paper presented at the same conference ("Evaluating Estimates of Materials Offshoring from U.S. Manufacturing"), Robert C. Feenstra and J. Bradford Jensen use an alternative method for allocating imported input across industries to derive imported intermediates. Comparing the results with the BEA import matrix that uses the comparability assumption, Feenstra and Jensen find differences between the two approaches and identify cells in the input-output table in which the differences are greatest. Unfortunately, data limitations prevent them from resolving those differences.
20. Notes about the imported intermediate input data are from BEA documentation that accompanied the data
21. Imported materials inputs include crude petroleum as a raw material for the refining and coal products industry. The increase in crude petroleum prices over the 1998-2006 period could be responsible for the increase in imported materials' share of intermediate inputs used by private industries and for the increase in imported materials' share of intermediate inputs in the manufacturing sector.
22. Crude oil is classified as a nonenergy material input to U.S. refineries, rather than an energy input.
23. In 2006, total materials imported by the petroleum industry accounted for 34 percent of material imports by the manufacturing sector. Over the 1997-2006 period, the price of imported intermediates for the petroleum industry grew 14 percent, compared with the 4-percent average growth of prices in the manufacturing sector as a whole.
24. W. Erwin Diewert, "Exact and Superlative Index Numbers," Journal of Econometrics, vol. 4, 1976, pp. 15-145.
25. Evsey Domar, "On the Measurement of Technological Change," Economic Journal, vol. 71, 1961, pp. 709-29.
26. The time series does not cover the business cycles sufficiently to divide the data into subperiods that would allow a meaningful analysis. A categorization of the data into subperiods of 1997-2000 and 2001-2006, as well as 1997-2002 and 2003-2006, and a comparison of results revealed a high sensitivity to the years into which the data were divided. Accordingly, no subperiod analysis is presented in this article.
27. Note that because output has been expanded to include imports, labor productivity growth is 2.6 percent per year, rather than 2.4 percent per year.
28. Christopher Kurz and Paul Lengermann, "Outsourcing and U.S. Economic Growth: The Role of Imported Intermediates," paper presented at the 2008 World Congress on National Accounts, May 12-17, 2008, Washington, DC, construct a gross output productivity measure in order to keep U.S. manufactured intermediates in the model.
29. The Kurz-Lengermann model allows an analysis of the shift from domestic to imported intermediate inputs
30. See, for example, papers presented at the Conference on Measurement Issues Arising from the Growth of Globalization, sponsored by the Upjohn Institute, Washington, DC, November 6-7, 2009