Can Measurement Error Explain Slow Productivity Growth in Construction?

Daniel Garcia and Raven S. Molloy
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Raven S. Molloy: https://www.federalreserve.gov/econres/raven-molloy.htm

No 2023-052, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Of all major industries, construction is the only one to have registered negative average productivity growth since 1987. One might suspect measurement error to have biased growth downward since the deflators for this sector, which are used to translate nominal construction spending into the real quantity of structures, have risen much faster than those for other sectors. We find evidence of an upward bias in these deflators related to unobserved improvements in structure quality, but the magnitude is not large enough to alter the view that construction-sector productivity growth has been weak. We also find only small contributions from other potential sources of measurement error. We conclude that productivity growth may well have been quite low in construction, even if it has not been as low as implied by official statistics.

Keywords: housing and real estate; productivity (search for similar items in EconPapers)
Pages: 38 pages
Date: 2023-07
New Economics Papers: this item is included in nep-eff
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:96651

DOI: 10.17016/FEDS.2023.052

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