Capacity Utilization and Technology Shocks in the U.S. Manufacturing Sector

In this paper the time series properties of the outcomes of two different specifications of a nonparametric productivity analysis are compared using data for three- and four- digit U.S. manufacturing industries over the period 1958-96. The first model is standard and does not account for variations of capacity utilization of the production factors whereas the second model does. Correcting for utilization leads on average to substantially smaller technology shocks which are less strongly correlation with growth rate series of output and hours as the results show. Also the probability of technological regress is considerably lower after the correction.