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Using Investment Data to Assess the Importance of Price Mismeasurement

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  • Comin Diego A

    ()
    (NYU)

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.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 6 (2006)
Issue (Month): 1 (April)
Pages: 1-42

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Handle: RePEc:bpj:bejmac:v:topics.6:y:2006:i:1:n:7

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  1. Bruce W. Hamilton, 2001. "Using Engel's Law to Estimate CPI Bias," American Economic Review, American Economic Association, vol. 91(3), pages 619-630, June.
  2. Martin Neil Baily & Robert J. Gordon, 1988. "The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 347-432.
  3. Bresnahan, Timothy F, 1986. "Measuring the Spillovers from Technical Advance: Mainframe Computers inFinancial Services," American Economic Review, American Economic Association, vol. 76(4), pages 742-55, September.
  4. Zvi Griliches, 1998. "Productivity, R&D, and the Data Constraint," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 347-374 National Bureau of Economic Research, Inc.
  5. James Bessen, 2002. "Technology Adoption Costs and Productivity Growth: The Transition to Information Technology," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 443-469, April.
  6. G. Christian Ehemann & Brent R. Moulton, 2001. "Balancing the GDP Account," BEA Papers 0014, Bureau of Economic Analysis.
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Cited by:
  1. Bruno Tissot & Les Skoczylas, 2005. "Revisiting recent productivity developments across OECD countries," BIS Working Papers 182, Bank for International Settlements.
  2. Diego Comin & Mark Gertler, 2006. "Medium-Term Business Cycles," American Economic Review, American Economic Association, vol. 96(3), pages 523-551, June.

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