Why Construction Industry Productivity is Declining / Steven G. Allen.

Format:

Book

Author/Creator:

Allen, Steven G.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1555.

NBER working paper series no. w1555

Language:

English

Subjects (All):

Production functions (Economic theory).

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Cambridge, Mass : National Bureau of Economic Research, 1985.

Summary:

According to unpublished data compiled by BLS, productivity in the construction industry reached a peak in 1968 and, except for a brief and small upturn between 1974 and 1976, has been falling ever since. This paper examines the sources of this productivity decline between 1968 and 1978 by estimating a production function to assign weights to various factors responsible for productivity change and deriving a new price deflator for construction which does not rely on labor or material cost indexes, thus eliminating a systematic bias toward overstating the rate of growth of prices.The production function analysis indicates that productivity should have declined by 8.8 percent between 1968 and 1978,representing 41 percent of the observed decline. The biggest factor in this decline was the reduction in skilled labor intensity resulting from a shift in the mix of output from largescale commercial, industrial, and institutional projects to single-family houses. Other important factors include declines in the average number of employees per establishment, capital-labor ratio, percent union, and the average age of workers. The difference between the official deflator and the new deflator proposed here accounts for an additional 51 percent of the reported productivity decline, leaving only 8 percent of the decline unexplained.

Notes:

Print version record

February 1985.