Productivity growth and competitiveness of the United States petroleum refining industry

Productivity studies provide an important source for economic analysis and policy issues. The augmented cost and production functions, in their translog forms, extend the reach of analysis by quantifying, in addition, second order and interaction effects.;The specific objectives of the study are threefold. The first is to analyze the production structure of the U.S. Petroleum Refining Industry. The second is to measure and analyze inputs productivity growth as well as total factor productivity growth. The final objective is to study the impact of total factor productivity as proxy for technology on exports and imports of the U.S. Petroleum Refining Industry. The time period chosen for this study is 1958-1986.;The analysis of the production structure of the industry is based on the translog multiproduct cost function. Using this function, twenty four different models with different specification were estimated. These model were constructed to investigate the following research decisions: (i) the treatment of technical change; (ii) the construction of service price of capital; (iii) the impact of scale characteristics; (iv) the treatments of input aggregation; (v) and the nature of factor adjustment. The selected model has the following specifications: full equilibrium, nonhomotheticity, nonneutral technical change, and capital gain is excluded from the service price of capital. The results of the analysis suggest some interesting conclusions: the industry operated at increasing return to scale; the technical change is labor and capital saving and material using; capital is substitute for material, production labor, and nonproduction labor; the relation between labor and material changed from substitute to complements; the relation between the two labor also changed from substitute to complement; total factor productivity growth contributed about 47% of output growth; total factor productivity underestimated technical change on the average; non-marginal pricing has negative effects on the growth of total factor productivity; total factor productivity growth enhanced the industry international competitiveness in gasoline domestic market and jet and distillate fuel oil world market.