Factor Utilization and Adjusted Productivity Estimates for the UK

This paper derives series for capital utilization, labour effort and total factor productivity (TFP) for the UK from a general equilibrium model with variable utilization and labour adjustment costs. Capital utilization tracks survey-based measures closely, but persistent movements in total hours worked mean our labour effort series is not as highly correlated with its comparators. Our estimated TFP series is less cyclical than the traditional Solow residual, although a weighted average of capital utilization and labour effort - aggregate factor utilization - and the Solow residual are not closely related. Copyright Bank of England 2007.