Economics - An Econometric Approach to Measures of Productivity in Mining

This paper considers the many problems involved in estimating rates of technical change via productivity indexes. In mining, declining ore grades complicate the measurement of progress considerably. The estimates discussed in this article were made for the United States iron mining industry by means of two techniques: a simple model of production with two inputs, and multiple regression. The results can be used to explain the relation existing on U.S. iron ranges between rates of exhaustion, technical change, output per man and the increase in capital proportions observed since World War I. Similar ob-servations can be made on the mining sector trends in the United States, Canada, and Japan. Formidable problems confront the economist attempting to estimate the influence of technological changes on the progress of mineral industries. Peculiar to these industries is the problem of how to adjust any measure of technological progress for the offsetting influence of exhaustion. Exhaustion has long been recognized in the mining industry as a critical dimension. Empirically, it is usually treated as a problem of declining grades of ore either in production or in reserves. There are studies of the trends in mining industries attempting to relate changes in input requirements to changes in grade and technology over time. Most frequently, the measure used to indicate technological progress is average labor productivity, e.g., output per man-hour. However, although such an approach has the merit of being simple and direct, it ignores the influence of other important factors of production such as capital. Without defining both the nature of technological change and of production, it can be very misleading to identify increases in labor productivity with tech-