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Lessons From the Latest Data on U.S. Productivity

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  • Jan P.A.M. Jacobs

    ()

  • Simon van Norden

Abstract

Productivity growth is carefully scrutinized by macroeconomists because it plays key roles in understanding private savings behaviour, the sources of macroeconomic shocks, the evolution of international competitiveness and the solvency of public pension systems, among other things. However, estimates of recent and expected productivity growth rates suffer from two potential problems: (i) recent estimates of growth trends are imprecise, and (ii) recently published data often undergo important revisions. This paper documents the statistical (un)reliability of several measures of aggregate productivity growth in the US by examining the extent to which they are revised over time. We also examine the extent to which such revisions contribute to errors in forecasts of US productivity growth. We find that data revisions typically cause appreciable changes in published estimates of productivity growth rates across a range of different productivity measures. Substantial revisions often occur years after the initial data release, which we argue contributes significantly to the overall uncertainty policymakers face. This emphasizes the need for means of reducing the uncertainty facing policymakers and policies robust to uncertainty about current economic conditions.

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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2010-33.

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Length: 44 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:een:camaaa:2010-33

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  1. Jordi Galí & Thijs van Rens, 2010. "The Vanishing Procyclicality of Labor Productivity," Kiel Working Papers, Kiel Institute for the World Economy 1641, Kiel Institute for the World Economy.
  2. Richard G. Anderson & Kevin L. Kliesen, 2006. "The 1990s acceleration in labor productivity: causes and measurement," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue May, pages 181-202.
  3. Kahn, James A. & Rich, Robert W., 2007. "Tracking the new economy: Using growth theory to detect changes in trend productivity," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(6), pages 1670-1701, September.
  4. Swanson, N.R. & van Dijk, D.J.C., 2001. "Are statistical reporting agencies getting it right? Data rationality and business cycle asymmetry," Econometric Institute Research Papers, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute EI 2001-28, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  5. Rochelle M. Edge & Thomas Laubach & John C. Williams, 2004. "Learning and shifts in long-run productivity growth," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2004-21, Board of Governors of the Federal Reserve System (U.S.).
  6. Lawrence Slifman & Carol Corrado, 1999. "Decomposition of Productivity and Unit Costs," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 328-332, May.
  7. Smets, Frank & Wouters, Rafael, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6112, C.E.P.R. Discussion Papers.
  8. Richard G. Anderson & Kevin L. Kliesen, 2010. "FOMC learning and productivity growth (1985-2003): a reading of the record," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Mar, pages 129-154.
  9. Jacobs, Jan P.A.M. & van Norden, Simon, 2011. "Modeling data revisions: Measurement error and dynamics of "true" values," Journal of Econometrics, Elsevier, Elsevier, vol. 161(2), pages 101-109, April.
  10. Faust, Jon & Wright, Jonathan H., 2009. "Comparing Greenbook and Reduced Form Forecasts Using a Large Realtime Dataset," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 27(4), pages 468-479.
  11. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, American Economic Association, vol. 91(1), pages 1-32, March.
  12. van Norden, Simon, 2011. "Current trends in the analysis of Canadian productivity growth," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 22(1), pages 5-25, January.
  13. Field, Alexander J., 2010. "The Procyclical Behavior of Total Factor Productivity in the United States, 1890–2004," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 70(02), pages 326-350, June.
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