Vertical integration and Productivity: The intensification of capital in Puerto Rico during the decades of 1960-1970
Keywords:
Productivity, vertical integration, input-output, capital intensification, Puerto RicoAbstract
This study relies on the vertical integration technique as an alternative to traditional Input-Output productivity measures.
The direct or Leontief approach confronts certain limitations, following the constant technical coefficient hypothesis.
Technical coefficients may vary as a result of technological change, which itself is independent of the coefficients.
Technological change could be related to the scale of production and thus, time plays an instrumental role.
The vertical integration technique confronts no such limitations.
Any changes, due to the scale of production or technological change, will only have an impact on the vertically integrated coefficient confronting the change, without altering the structure of the system.
The study follows a series of linear models and matrix algebra, using Puerto Rico’s economy as a case study. We derived the direct and indirect labor and capital requirements, as well as the maximum eigenvalues, using the technical coefficient matrices and labor vectors for Puerto Rico’s economy.
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