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Do Computers Make Output Harder to Measure?

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  • Robert H. McGuckin

    (The Conference Board)

  • Kevin Stiroh

    ()
    (Federal Reserve Bank of New York (formerly with The Conference Board))

Abstract

In recent years, U.S. productivity growth accelerated sharply in manufacturing, but has remained sluggish in the most computer-intensive service industries. This paper explores the possibility that information technology is generating output that is increasingly hard to measure in non-manufacturing industries, which contributes to the divergence in industry productivity growth rates. Our results suggest that measurement error in 13 computer-intensive, non-manufacturing industries increased between 0.74 and 1.57 percentage points per year in the 1990s, which understates annual aggregate productivity growth by 0.10 to 0.20 percentage points in the 1990s. This adds to an estimated 0.22 to 0.30 percentage point error from the increasing share of aggregate output in these hard-to-measure industries. Thus, increasing measurement problems may understate aggregate productivity growth by an additional 0.32 to 0.50 percentage points per year in the 1990s and play an important role in understanding recent productivity trends at the industry level.

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File URL: http://www.conference-board.org/economics/workingpapers.cfm?pdf=E-0002-00-WP
File Function: First version, 2000
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Bibliographic Info

Paper provided by The Conference Board, Economics Program in its series Economics Program Working Papers with number 00-02.

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Length: 46 pages
Date of creation: Apr 2000
Date of revision:
Publication status: Published in Journal of Technology Transfer, Vol. 26, No. 4, 2001, pages 295-321.
Handle: RePEc:cnf:wpaper:0002

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References

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  1. Berndt, Ernst R. & Morrison, Catherine J., 1992. "High-tech capital formation and economic performance in U.S. manufacturing industries : an exploratory analysis," Working papers 3419-92., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1, May.
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  7. Surendra Gera & Wulong Wu & Frank C. Lee, 1999. "Information technology and productivity growth: an empirical analysis for Canada and the United States," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 384-407, April.
  8. Allen N. Berger & Loretta J. Mester, 1999. "What Explains the Dramatic Changes in Cost and Profit Performance of the U.S. Banking Industry?," Center for Financial Institutions Working Papers 99-10, Wharton School Center for Financial Institutions, University of Pennsylvania.
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  10. 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.
  11. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
  12. Hill, T P, 1977. "On Goods and Services," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 23(4), pages 315-38, December.
  13. Daniel E. Sichel, 2000. "The Productivity Slowdown: Is A Growing Unmeasurable Sector The Culprit?," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 367-370, August.
  14. Stiroh, Kevin J, 1998. "Computers, Productivity, and Input Substitution," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 175-91, April.
  15. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  16. Frank R. Lichtenberg, 1993. "The Output Contributions of Computer Equipment and Personnel: A Firm- Level Analysis," NBER Working Papers 4540, National Bureau of Economic Research, Inc.
  17. Joseph H. Haimowitz, 1998. "Has the surge in computer spending fundamentally changed the economy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 27-42.
  18. Donald Siegel, 1997. "The Impact Of Computers On Manufacturing Productivity Growth: A Multiple-Indicators, Multiple-Causes Approach," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 68-78, February.
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Cited by:
  1. Kevin J. Stiroh, 2001. "Information technology and the U.S. productivity revival: what do the industry data say?," Staff Reports 115, Federal Reserve Bank of New York.
  2. Sang-Yong Tom Lee & Xiao Jia Guo, 2004. "Information and Communications Technology (ICT) and Spillover: A Panel Analysis," Econometric Society 2004 Far Eastern Meetings 722, Econometric Society.
  3. Kevin J. Stiroh & Dale W. Jorgenson, 2000. "U.S. Economic Growth at the Industry Level," American Economic Review, American Economic Association, vol. 90(2), pages 161-167, May.
  4. Kapur, Basant K., 2012. "Progressive services, asymptotically stagnant services, and manufacturing: Growth and structural change," Journal of Economic Dynamics and Control, Elsevier, vol. 36(9), pages 1322-1339.
  5. Crafts, Nicholas, 2002. "The Solow Productivity Paradox in Historical Perspective," CEPR Discussion Papers 3142, C.E.P.R. Discussion Papers.
  6. Bart van Ark & Robert Inklaar & Robert H. McGuckin, 2003. "ICT and Productivity in Europe and the United States: Where Do the Differences Come From?," Economics Program Working Papers 03-05, The Conference Board, Economics Program.

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