Specialization

Table 1. The Specialization of Capital

	Individual				Individual B
No Specialization Of Capital:	Farming Capital:	1/2 unit	Farming Labor:	1/2 unit	Farming Capital:	1/2 unit	Farming Labor:	1/2 unit
	Cattle- Raising Capital:	1/2 unit	Cattle- Raising Labor:	1/2 unit	Cattle- Raising Capital:	1/2 unit	Cattle- Raising Labor:	1/2 unit
	Total Capital:	1 unit	Total Labor:	1 unit	Total Capital:	1 unit	Total Labor:	1 unit
Total Output:	Farming:	=	(1/2)^1 kf +	(1/2)^1 kf	kf = 1/2,	0 < <
	Cattle Raising :	=	(1/2)^1 k +	(1/2)^1 kc	k = 1/2,	0 < <
The Specialization Of Capital:	Farming Capital: (morning)	1 unit	Farming Labor:	1/2 unit	Farming Capital:	1 unit	Farming Labor: (after- noon)	1/2 unit
	Cattle- Raising Capital: (afternoon)	1 unit	Cattle- Raising Labor:	1/2 unit	Cattle- Raising Capital:	1 unit	Cattle- Raising Labor: (morning	1/2 unit
	Total Capital:	2 units	Total Labor:	1 unit	Total Capital:	2 units	Total Labor:	1 unit
Total Output :	Farming:	2	(1/2)^1 kf +	(1/2)^1 kf	kf = 1,	0 < <
	Cattle Raising:	2	(1/2)^1 kc +	(1/2)^1 kc	k = 1,	0 < <

Note. Total initial endowment: 2 units of capital and 2 units of labor.

Electronic copy available at: https://ssrn.com/abstract=3602016

1^ This long-run trend in shiftwork, rental services, and capital utilization that we study here should be distinguished from the short-run variations in capacity utilization studied by Lucas (1970) and Burnside and Eichenbaum (1996). But it is relevant that Burnside et al. (1995), using electricity consumption to correct for capital utilization, find that “there is virtually no evidence against the hypothesis of constant returns to scale” in manufacturing once capital utilization is accounted for. Burnside et al. (1996) also find that, working with annual data, the technological progress in manufacturing suggested by Solow residuals disappear once capital utilization is corrected for using electricity consumption.

2^ Ever since the Fair Labor Standards Act of 1938 (the Wage-flour Law), overtime pay has been time-and-a-half. The fact that there is little evidence of compensating wage differential for working night shifts may suggest that labor prefers shiftwork to overtime work. Kostiuk (1990) argues that the fact that estimated wage differentials are small may be due to self selection of workers into different shifts.

3^ See also Griliches (1961, 1963a, 1963b, 1990), Jorgenson (1990), and Hulten (1990) for more discussions on the measurement of capital inputs.

4^ Griliches (1961) has made this point earlier.