When the Reagan Administration first publicly acknowl- edged, back in 1985, that the American trade deficit was, indeed, a problem, the claim was made that the villain was the
value of the American dollar in international currency
exchange. When the trade deficit failed to improve signifi-
cantly in the wake of a devalued dollar, the productivity of
American industry was cited as the culprit. In late-1988, with
the trade deficit still stubbornly high, many economists and
industrialists began to cast the quality of American products
in the role of malefactor.1 It is quite likely that each of
these three factors is a major contributor to the country's
trade deficit problem, and it is likely that other factors are
The purpose of this research is to examine one of the
problems implicated in the trade deficit morass. In this exam-
ination, productivity in the American economy is considered.
Comparison of American productivity with the productivity
experiences of other countries are also made. A particular
emphasis is placed on the Japanese productivity experience.
1C. H. Deutsch, "U. S. Industry's Unfinished Struggle,"
The New York Times", Section 3 (21 February 1988): 1.
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PRODUCTIVITY CONCEPTS AND MEASUREMENT
Productivity may mean many different things, depending
upon the context in which the term is used. With the continu-
ing advances in manufacturing technology, the multifactor pro-
ductivity concept is probably the most valid measure. Multi-
factor productivity is the ratio of output per unit of labor
and capital inputs combined, which enables the productivity
ratio to reflect changes in a number of factors (such as tech-
nology, shifts in labor force composition, capacity utiliza...