Why Construction Industry Productivity Is Declining

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Abstract
The sources of productivity change in the construction industry between 1968 and 1978 are examined. Production function analysis indicates that productivity should have declined by 8.8%, representing 41% of the observed decline. The biggest factor in this decline was the reduction in skilled labor intensity resulting from a shift in the mix of output from large scale commercial, industrial, and institutional projects to single-family houses. The difference between the official deflator and the new deflator proposed here accounts for an additional 51% of the reported productivity decline, leaving only 8% of the decline unexplained.

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