Empirical Exploration of the Structure of Costs

Abstract

Manufacturing costs obviously play an important role in the functioning of an economy. They are a major determinant of production and pricing policies. They constitute an initiating point in the process of income distribution. They are directly influenced by, and may well influence, secular economic forces as well as short-term fluctuations. Thus technological advances, the depletion of natural resources, and changes in the scale of production probably exert much of their pressure on the farther reaches of the economy through their immediate impact on production costs in manufacturing. Costs are likewise deeply imbedded within the network of interactions involved in recurrent changes in price levels, investment requirements and employment. In addition, costs provide a means of measuring changes in the allocation of resources among industries as well as in the porportions in which each industry combines major productive resources.