Effects of Worker Attitudes on Production Costs and the Value of Capital Input

In earlier papers we have defined and demonstrated the feasibility of estimating an index of worker performance, based on indicators of worker attitude, in the context of an equilibrium translog cost function.1 We repeat some of the background material here in compressed form. The objective of this paper is to investigate the worker-attitude phenomenon in the context of a model of the production process that explicitly recognises disequilibrium in the fixity of the capital stock during the production period.2 This approach, while it begs certain unresolved questions, is preferable to the equilibrium approach for investigation of the effect of worker attitudes on the capital requirements in US automobile manufacturing.3 We chose the disequilibrium model with two objectives. First, the capital structure of auto assembly and parts manufacturing plants is largely fixed during a particular model year. Since the model year does not coincide exactly with the calendar year, there will be some blurring of this effect, but the fixed-capital model is far preferable for this industry to the instantaneous-adjustment assumption. Second, in the equilibrium model the bias in technical change for capital in this instance induced by the effects of worker attitudes -is constrained so as to be balanced by offsetting effects in the use of other factors. The disequilibrium model, on the other hand, constrains only the variable factors in this way. While the demand (or share) equation for capital is not estimated directly, the effect of altered worker attitude can be simulated using the estimated model.4 Our earlier study found a substantial capital-using bias in the effect of worker attitudes on the equilibrium translog cost function.