Estimation and Analysis of Multifactor Productivity in Truck Transportation: 1987-2003

Abstract

The analysis has three objectives: 1) to estimate multifactor productivity (MFP) in truck transportation during 1987-2003; 2) to examine changes in multifactor productivity in U.S. truck transportation, over time, and to compare these changes to MFP of the U.S. business sector and other transportation subsectors; and 3) to assess the factors that affected changes of MFP in truck transportation over the period of analysis.

With respect to the calculation framework, the analysis estimates annual MFP in truck transportation in the United States over the 1987-2003 period. The data used for the estimations are based on the North American Industrial Classification System (NAICS). The basic data series were obtained from the Bureau of Economic Analysis. The labor data under NAICS were extrapolated from 1998 back to 1987. Data on the land input were estimated using the method of the Bureau of Labor Statistics, with some modifications. In future work, other methods will be used to estimate the land input.

With respect to methodology, use is made of the basic growth-accounting methodology and the methodology using the Tornqvist index number approach. MFP was estimated in three different scenarios. In the first one, the basic growth-accounting methodology was used, without a measurement for land. In the second one, MFP was calculated with the Tornqvist index and without a measurement for land. In the third scenario, MFP was calculated with the Tornqvist method and with a measurement for land.

With respect to MFP results, the calculations indicate a mixed record of multifactor productivity in truck transportation over the period of analysis. Truck MFP increased during the first subperiod— from 1987 to 1995—and decreased during the second subperiod—1995 to 2001. In the last three years of analysis—2001 to 2003—truck MFP again increased.

The outcomes of the calculations indicate that both methodologies (the basic growth-accounting methodology and the one using the Tornqvist index) provide very similar results on multifactor productivity in truck transportation. That implies that either method can be used to provide appropriate estimates of MFP.

A comparison of truck MFP with other transportation industries and the U.S. economy is possible for years in which MPF data are available for the various transportation industries and the economy. These data show that truck MFP over the 1987-2000 period increased faster, at 1.1% per annum, than that of the U.S. private business sector, which grew at 0.9% per annum. Thus, the trucking subsector contributed positively to the growth of multifactor productivity in the U.S. economy over this time period. During 1987- 2001, MPF growth in trucking was the same as in the U.S. economy, at 0.8% per annum. After 2001, MFP in trucking grew at a lower rate than in the U.S. private economy. In addition, during 1987-1995, MFP in trucking increased at a faster rate, of 2.0% per annum, than MFP in air transportation, which grew at 1.2% annually.

With respect to factors that affected changes in truck multifactor productivity over the period of analysis, the assessment considers three subperiods of MFP outcomes: 1987-1995, 1995-2001, and 2001-2003. Factors that affected the increases in MFP during the first subperiod (1987-1995) include: 1) the improvement in the capital input— indicated by increases in capital per worker, and the rapid increases in the use of computer hardware and software (information technologies); 2) an improvement in the fuel efficiency of trucks; 3) an increase in the average length of haul; 4) an increasing use of containers; and 5) positive effects on industry efficiency from interstate deregulation taking place over time. Factors that affected decreases in MFP during the second subperiod (1995-2001) include: 1) a declining efficiency in utilizing intermediate inputs; 2) a lower growth rate of capital per worker; 3) a lower growth rate of utilizing containers; 4) the decrease in industry output in 2001, as a result of the economic recession that year and the catastrophic events of 9/11/2001; and 5) intrastate deregulation of trucking in 1995; this was followed by a period of adjustments (entry and exit of firms) and uncertainty which appear to have had a negative impact on truck MFP. Factors that affected MFP increases during the third subperiod (2001-2003) include: 1) increasing efficiency in the utilization of intermediate inputs; 2) increases in the use of computers; 3) increases in the use of containers; and 4) the adjustment of the industry after intrastate deregulation in 1995, which completed and made comprehensive the deregulation of truck transportation.