Using Investment Data to Assess the Importance of Price Mismeasurement

Diego Comin

The B.E. Journal of Macroeconomics, 2006, vol. 6, issue 1, 1-42

Abstract: This paper presents a new approach to assess the role of price mismeasurement in the productivity slowdown. I invert the firm’s investment decision to identify the embodied and disembodied components of productivity growth. With a Cobb-Douglas production function, output price mismeasurement only should affect the latter. Contrary to the mismeasurement hypothesis, I find that in the Post-War period, disembodied productivity grew faster in the hard-to-measure than in the non-manufacturing easy-to-measure sectors, and that disembodied productivity slowed down less in the hard-to-measure than in the easy-to-measure sectors since the 70’s. These results hold a fortiori when capital and labor are complements.

Keywords: investment; price mismeasurement; productivity slowdown; total factor productivity; embodied and disembodied productivity (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (1)

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Working Paper: Using Investment Data to Assess the Importance of Price Mismeasurement (2004)
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DOI: 10.2202/1534-5998.1396

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