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Does the United States have a Productivity Slowdown or a Measurement Problem

David Byrne, Marshall B. Reinsdorf and John Fernald ()
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Marshall B. Reinsdorf: International Monetary Fund

No 2016-17, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: After 2004, measured growth in labor productivity and total-factor productivity (TFP) slowed. We find little evidence that the slowdown arises from growing mismeasurement of the gains from innovation in IT-related goods and services. First, mismeasurement of IT hardware is significant prior to the slowdown. Because the domestic production of these products has fallen, the quantitative effect on productivity was larger in the 1995-2004 period than since, despite mismeasurement worsening for some types of IT--so our adjustments make the slowdown in labor productivity worse. The effect on TFP is more muted. Second, many of the tremendous consumer benefits from smartphones, Google searches, and Facebook are, conceptually, non-market: Consumers are more productive in using their nonmarket time to produce services they value. These benefits do not mean that market-sector production functions are shifting out more rapidly than measured, even if consumer welfare is rising. Still, gains in non-market production appear too small to compensate for the loss in overall wellbeing from slower market-sector productivity growth. Third, other measurement issues we can quantify (such as increasing globalization and fracking) are also quantitatively small relative to the slowdown. Finally, we suggest high-priority areas for future research.

Keywords: Information technology; Measurement; Non-market production; Prices; Productivity (search for similar items in EconPapers)
Date: 2016-03-04
New Economics Papers: this item is included in nep-eff and nep-pay
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http://www.federalreserve.gov/econresdata/feds/2016/files/2016017pap.pdf Full text (application/pdf)
http://dx.doi.org/10.17016/FEDS.2016.017 DOI (application/pdf)

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Journal Article: Does the United States Have a Productivity Slowdown or a Measurement Problem? (2016) Downloads
Working Paper: Does the United States have a productivity slowdown or a measurement problem? (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-17

DOI: 10.17016/FEDS.2016.017

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