THE IMPACT OF ELECTRIC-POWER ON PRODUCTIVITY - A STUDY OF US MANUFACTURING 1950-84

According to the historical record, the increased use of energy in general and electric power in particular stands as one of the key factors in productivity growth. Growth accountants, however, find little support for this view, rejecting claims that the productivity slowdown can be attributed to the lower rate of growth of the energy input in US manufacturing. In this study, an attempt at reconciling the historical record with the empirical facts is made. Specifically, the commonly used factor income shares in the relevant Divisia input-growth index, are replaced by the estimated output-input elasticities. The latter attribute a considerably larger role to electric power than previous studies indicated. These are then used to reevaluate the sources of growth in US manufacturing.