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Measuring economic activity and economic welfare: what are we missing?

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  • Charles Steindel

Abstract

Major U.S. economic data, most notably GDP and Industrial Production, are undergoing major changes. Proposals have been made for significant alterations in the CPI. The revision process has helped to spur debate on such topics as the proper method of accounting for high technology's role in the economy, the reported sluggishness of productivity growth in many service industries, and the overstatement of price increases for numerous products. This paper attempts to assess the potential impact of some of these problems on our understanding of basic trends in the economy. It is found that with even fairly generous assumptions as to the time path of errors in price data, the fundamentals of the economy's broad movements do not change: productivity and real earnings growth were likely still substantially slower in the first half of the 1990s than before 1973.

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Bibliographic Info

Paper provided by Federal Reserve Bank of New York in its series Research Paper with number 9732.

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Date of creation: 1997
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Handle: RePEc:fip:fednrp:9732

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Keywords: Economic indicators ; Consumer price indexes ; Economic conditions - United States;

References

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  1. Charles Steindel, 1995. "Chain-weighting: the new approach to measuring GDP," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 1(Dec).
  2. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
  3. 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.
  4. Brent R. Moulton & Karin E. Moses, 1997. "Addressing the Quality Change Issue in the Consumer Price Index," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 305-366.
  5. Charles R. Hulten, 1997. "Quality change in the CPI," Review, Federal Reserve Bank of St. Louis, issue May, pages 87-100.
  6. Robert Gordon, 1995. "Problems in the Measurement and Performance of Service-Sector Productivity in the United States," RBA Annual Conference Volume, in: Palle Andersen & Jacqueline Dwyer & David Gruen (ed.), Productivity and Growth Reserve Bank of Australia.
  7. Lawrence Slifman & Carol Corrado, 1999. "Decomposition of Productivity and Unit Costs," American Economic Review, American Economic Association, vol. 89(2), pages 328-332, May.
  8. Carol Corrado & Charles Gilbert & Richard Raddock, 1997. "Industrial production and capacity utilization: historical revision and recent developments," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 67-92.
  9. 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.
  10. Brian Motley, 1992. "Index numbers and the measurement of real GDP," Economic Review, Federal Reserve Bank of San Francisco, pages 3-13.
  11. Arturo Estrella & Frederic S. Mishkin, 1996. "The yield curve as a predictor of U.S. recessions," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 2(Jun).
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