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The Productivity Slowdown: Is A Growing Unmeasurable Sector The Culprit?

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  • Daniel E. Sichel

Abstract

The productivity slowdown of the early 1970s continues to puzzle economists. A frequent explanation of this puzzle is that mismeasurement of output has worsened enough to help account for the apparent shortfall of output growth. Griliches (1994) highlighted one channel through which this worsening measurement could occur. He raised the possibility that—because output growth in the service sector likely is undermeasured—the rising share of services has led to greater undermeasurement of overall economic growth. This paper demonstrates that this argument is of little quantitative significance. Even under assumptions most favorable to the hypothesis, the rising share of services has had only a small impact on measurement error. These results—along with evidence from Baily and Gordon (1988)—make mismeasurement of output an improbable explanation for the productivity slowdown in aggregate data. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 79 (2000)
Issue (Month): 3 (August)
Pages: 367-370

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Handle: RePEc:tpr:restat:v:79:y:2000:i:3:p:367-370

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Cited by:
  1. Ngai, Liwa Rachel & Pissarides, Christopher, 2004. "Structural Change in a Multi-Sector Model of Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4763, C.E.P.R. Discussion Papers.
  2. Franck Paolucci, 2007. "Des contraintes aux contributions des investissements en R&D aux Etats-Unis," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2007-16, Observatoire Francais des Conjonctures Economiques (OFCE).
  3. Robert H. McGuckin & Kevin Stiroh, 2000. "Do Computers Make Output Harder to Measure?," Economics Program Working Papers, The Conference Board, Economics Program 00-02, The Conference Board, Economics Program.
  4. Soledad Núñez & Miguel Pérez, 2000. "La rama de servicios en España: un análisis comparado," Banco de Espa�a Working Papers, Banco de Espa�a 0007, Banco de Espa�a.
  5. Wachter, Till von, 2001. "Employment and productivity growth in service and manufacturing sectors in France, Germany and the US," Working Paper Series, European Central Bank 0050, European Central Bank.
  6. Charles Steindel, 1999. "The impact of reduced inflation estimates on real output and productivity growth," Current Issues in Economics and Finance, Federal Reserve Bank of New York, Federal Reserve Bank of New York, vol. 5(Jun).
  7. Charles Steindel & Kevin Stiroh, 2001. "Productivity: what is it and why do we care about it?," Staff Reports, Federal Reserve Bank of New York 122, Federal Reserve Bank of New York.

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