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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Total factor productivity vs. realism: the South African coal mining industry
Author:Fine, B.
Year:1992
Periodical:South African Journal of Economics
Volume:60
Issue:3
Pages:277-292
Language:English
Geographic term:South Africa
Subject:coal mining
External link:https://doi.org/10.1111/j.1813-6982.1992.tb01035.x
Abstract:This article examines the position that the coal industry has occupied in the South African economy. This is done indirectly by consideration of an earlier attempt to look at the South African coal industry by R. Jones (1983). He adopts the conventional method of measuring total factor productivity (TFP) but he does not question whether the economic conditions within South Africa justify the application of the neoclassical paradigm. Although the methodology of calculating TFP has long been known to be invalid, since it relies upon a model of the economy which treats it as if it can be reduced to a one-good world in which marginal productivities of factor inputs correctly measure contribution to output, the present author is more concerned to examine whether, within this ideal conception of the economy, the conditions for measuring total factor productivity hold. The article first gives a summary of Jones' results. Then it examines whether the conditions of perfect competition necessary to justify the measurement of TFP have been characteristic of the South African coal industry. In finding that they do not, the author draws conclusions opposite to those of Jones. The coal industry is seen to have gone through a remarkable transformation as capital-intensive methods of production have increasingly been adopted on large-scale mines. This process has quickened over recent years, and Jones' (cyclical) periods of TFP decline are more likely to have represented an acceleration of what are secular trends in the development of the South African coal industry. Bibliogr., notes, ref.
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