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June 1994, Vol. 117, No. 6
Thomas M. Muth II and Edna Thea Falk
M ultifactor productivity, a measure relating output to the combined inputs of labor, capital, and intermediate purchases, grew at an average annual rate of 0.5 percent between 1958 and 1991 in the household furniture industry. (See chart 1.) Many factors influence movements in multifactor productivity such as technological change, changes in the skill and effort of the work force, and economies of scale.
For more than 10 years, the Bureau of Labor Statistics has published a labor productivity measure for the household furniture industry. In this article, we extend the analysis of the household furniture industry, Standard Industrial Classification (SIC) 251, by presenting a multifactor productivity measure for the industry.
Labor productivity increased at an average annual rate of 1.8 percent over the 1958-91 period. Labor productivity, as measured by output per employee hour, is comprised of the effects of changes in capital per hour, intermediate purchases per hour (materials, fuels, electricity, and purchased business services), and multifactor productivity. The multifactor measure accounts for the influences of capital and intermediate purchases in the input measure and does not reflect the impact of these influences on the productivity residual. It also allows analysts to quantify the effects on labor productivity of changes in capital relative to labor and intermediate purchases relative to labor.
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