Academic journal article Global Business and Management Research: An International Journal

The Evolution of Capital Productivity in Greek Manufacturing

Academic journal article Global Business and Management Research: An International Journal

The Evolution of Capital Productivity in Greek Manufacturing

Article excerpt


Measures of productivity growth establish major indicators for the analysis of economic growth. There is a variety of different approaches to productivity measurement and their calculation and interpretation demands careful consideration, in particular when undertaking international comparisons.

A general definition is that productivity is the association between the output generated by a production or service system and the input provided.

Productivity is the best general estimate of a country's ability to establish a high and rising standard of living for each of its citizens. Productivity increase is both the cause and the consequence of technical progress, accumulation of human and physical capital, institutional arrangements and development of dynamic forces operative in an enterprise and economy (Prokopenko, 1987). The objectives of productivity measurement incorporate: technology, efficiency, real cost savings, benchmarking production processes and living standards.

A frequently stated purpose of measuring productivity growth is to trace technical development. Technology has been described as "the currently known way of converting resources into outputs desired by the economy" (Griliches, 1987) and becomes evident either in its disembodied form (such as new blueprints, scientific results, new organisational techniques) or embodied in new products (advances in the design and quality of new vintages of capital goods and intermediate inputs).

The search for acknowledging changes in efficiency is conceptually different from identifying technical change. Full efficiency in an engineering sense means that a production process has attained the maximum amount of output that is possible with current technology, and given a fixed amount of inputs (Diewert and Lawrence, 1999). Hence, technical efficiency gains are a movement towards "best practice", or the elimination of technical and organisational inefficiencies. It must be added that when productivity assessments concern the industry level, efficiency improvements can either be due to improved efficiency in individual establishments that make up the industry or to a shift of production towards more efficient establishments (Fried 2008).

A pragmatic way to explain the essence of measured productivity change is real cost savings (Harberger, 1998). In the field of business economics, benchmarking production processes help to pin down inefficiencies. Productivity measurement is vital for assessing standards of living (Vrat, 2009).

Firstly, this article will consider the meaning of Capital Productivity (CP). Different approaches of calculating CP are discussed. The methodology followed for the estimation of CP is highlighted. Capital productivity for 18 manufacturing sectors will be calculated across the period 1963-2006.

The eighteen industries that are examined are: (1) food and beverage industries; (2) tobacco manufactures; (3) textiles; (4) manufacture of footwear, other wearing apparel and made-up textile goods; (5) manufacture of wood and cork, except manufacture of furniture; (6) manufacture of paper and paper products; (7) printing and publishing industries; (8) manufacture of leather and leather and fur products, except footwear and other wearing apparel; (9) manufacture of rubber and plastic products; (10) manufacture of chemicals and chemical products; (11) manufacture of products of petroleum and coal; (12) manufacture of non-metallic mineral products, except products of petroleum and coal; (13) basic metal industries; (14) manufacture of metal products, except machinery and transport equipment; (15) manufacture of machinery, except electrical machinery; (16) manufacture of electrical machinery, apparatus, appliances and supplies; (17) manufacture of transport equipment; and (18) miscellaneous manufacturing industries that include the manufacture of furniture.

Capital productivity "relatives" will be estimated for all 18 industries. …

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