Abstract
Productivity growth rates and patterns differ significantly between countries over the very long term as well as over short periods of time. In general, the reasons for these pronounced differences in national productivities are obvious. Countries vary enormously in their human resources, natural resources, capital resources, culture, institutions and organization of production. Attempts at a methodical accounting of the sources of different rates of international growth rates have been undertaken by Denison (1967), who provides important insight into the international role of productivity in economic growth.
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Notes
Firm A may also produce for the domestic market. The impact of domestic production is subsumed in the elasticity of the average cost of export production Φ A .
Some of the X i ’s represent flow of capital services, and their corresponding W i ’s incorporate the user cost of capital.
If equations (7.5) and (7.6) do not hold then the cost advantage of Firm A over the representative B firm, as expressed in (7.8) does not guarantee profitability since B may simply be minimizing loss.
More precisely, ε AB is dependent also on the level of P BB and ε BB is dependent, among other things, on the level of P AB . Thus firm A cannot determine the price elasticity for its product in the B market without knowledge of the cost structure and demand conditions in B. The same holds for B.
A word of caution is appropriate in this context. Trade in intermediate or primary goods may occur between countries A and B, or between B and other countries, spurred, in part, by disparities in underlying productivities, which may affect the V<Stack><Subscript>ji</Subscript><Superscript>B</Superscript></Stack>‘s. In extreme cases, most intermediary or primary inputs may be imported to B from A or other countries. The comparative cost analysis based on succession of input-output tables may have to be modified accordingly.
Although Sraffa’s system applies to a simple world without proprietary technologies serving as inputs, a dynamic input-output analysis based on sequences of changing input-output coefficients can incorporate effects of technical changes that have taken place in a succession of input industries.
A recent study of the competitiveness of the U.S. steel industry by Crandall (1981) emphasizes the disparities in hourly labor compensation levels between the U.S. and Japan. However, Crandall acknowledges the important role of changes in relative productivities generated by the diffusion of new technology, which aided the new steel exporters in competing with older established firms in the U.S. It is noteworthy that the Japanese gains in relative productivity contributed to reduction in the disparities in hourly compensation levels between the U.S. and Japan during the 1964–73 period as demonstrated by the trends in relative hourly labor compensation in table 7–1. Crandall also documents changes in raw material (ore) costs of the U.S. steel industry. Unfortunately comparable reliable data is not available for the Japanese steel industry to assess trends in relative costs. Nevertheless it seems unlikely that changes in U.S. domestic ore costs relative to world market prices played a very significant role in relative cost of production changes.
Production capacity planning in Japan may have been partly induced by governmental industrial policy. For discussion of the concept and practice of industrial policy see Lindbeck (1981). The Japanese government strategies of picking currently vulnerable future growth industries in which to make export market drives is well documented by Pugel et al. (1983) in their study of the Japanese semiconductors and computers industries. They point out that in the early 70’s the Japanese government sheltered domestic markets in those industries by providing assistance through the availability of capital and R&D subsidization. This support became less significant as the companies and the industry became competitively viable. At the same time, Pugel et al note that the Japanese semiconductor industry has benefited from a shift in Japanese comparative advantages in favor of skilled labor intensive industries which appeared to offset their competitive weakness in the provision of software products.
See Business Week, June 13, 1983, No. 2794: 84–94, and June 27, 1983, No. 2796: 41–42.
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© 1984 Kluwer Nijhoff Publishing
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Sudit, E.F. (1984). Productivity Based Management of International Operations. In: Productivity Based Management. Studies in Productivity Analysis, vol 5. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-9667-3_7
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DOI: https://doi.org/10.1007/978-94-011-9667-3_7
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