Material and value-adding inputs in manufacturing enterprises

Because of the nature of assembly-line operations, one would expect technol ogies in manufacturing firms to differ in systematic ways from those in man y other types of firms. Identifying such differences can therefore be usefu l in the formulation and testing of restrictions to flexible functional for ms. In the present paper, I characterize a multiproduct manufacturing firm and use the characterization to formulate testable hypotheses about the fir m's technology, cost function, and profit function. I argue that manufactur ing enterprises exhibit a form of almost nonjointness in input quantities a nd prices in which the individual sub-technologies have quasi-fixed proport ions. Substitution across product lines is responsible for the substitutabi lity between material and value-adding inputs that we often observe in aggr egate data. Neglecting the special structure of manufacturing technology ca n seriously bias estimates of aggregate productivity growth rates.