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Using Investment Data to Assess the Importance of Price Mismeasurement

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  • Diego Comin

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.

Suggested Citation

  • Diego Comin, 2004. "Using Investment Data to Assess the Importance of Price Mismeasurement," NBER Working Papers 10627, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10627
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    1. 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.
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    7. Bresnahan, Timothy F, 1986. "Measuring the Spillovers from Technical Advance: Mainframe Computers inFinancial Services," American Economic Review, American Economic Association, vol. 76(4), pages 742-755, September.
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    Cited by:

    1. Diego Comin & Mark Gertler, 2006. "Medium-Term Business Cycles," American Economic Review, American Economic Association, vol. 96(3), pages 523-551, June.
    2. Bruno Tissot & Les Skoczylas, 2005. "Revisiting recent productivity developments across OECD countries," BIS Working Papers 182, Bank for International Settlements.

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    More about this item

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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