The contributions of productivity, price changes and firm size to profitability |
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Authors: | Denis Lawrence W Erwinm Diewert Kevin J Fox |
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Institution: | (1) Meyrick and Associates, 6 Kurundi Place, Hawker, ACT, 2614, Australia;(2) Department of Economics, University of British Columbia, Vancouver, BC, Canada, V6T 1Z1;(3) School of Economics, University of New South Wales, Sydney, 2052, Australia |
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Abstract: | Sources of profit change for Telstra, Australia’s largest telecommunications firm, are examined. A new method allows for changes, in a firm’s profits to be broken down into separate effects due to productivity change, price changes, and growth in the firm’s size. This in turn allows us to calculate the distribution of the benefits of productivity improvements between consumers, labor, and shareholders. The results show that around half the benefits from Telstra’s productivity improvements from 1984 to 1994 were passed on to consumers in the form of real price reductions. |
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Keywords: | Index number theory Productivity growth Returns to shareholders Customers and workers Regulation of utilities |
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