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Problems in the Measurement and Performance of Service-Sector Productivity in the United States

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  • Robert J. Gordon

Abstract

Not only has U.S. productivity been poor by international standards but it is highly heterogeneous at the disaggregated industry level. Manufacturing has continued to do well while nonmanufacturing has done poorly, especially the services. Within services, apparel retailing has done well while food retailing has done badly; railroad productivity has accelerated while airline productivity has decelerated. This dispersion of performance argues against a single over-arching explanation of the slowdown. The recent shift to chain- weighted productivity measures substantially increases the magnitude of the U.S productivity slowdown and shifts it later in time. Performance in the 1970s is better than previously thought, while performance in the 1990s has been substantially worse. In addition, productivity performance in each decade has been understated due to an upward bias in the Consumer Price Index This 'CPI bias' has led to an uneven understatement of productivity change, with major errors in manufacturing, trade, and some services. The paper emphasizes two substantive causes of the productivity slowdown that go beyond measurement errors. First, some industries (e.g. electric utilities and airlines) reached a technological frontier in which the sources of earlier rapid productivity growth were exhausted. Second, slow productivity growth in food retailing and some service industries reflects a feedback from the weak bargaining position of U.S. labor. Weak unions, a falling real minimum wage, and immigration have combined to keep real wages in U.S. service industries relatively low, and this encourages overhiring by the standards of some other industrial nations.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5519.

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Date of creation: Sep 1996
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Handle: RePEc:nbr:nberwo:5519

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  1. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, January.
  2. Robert Ford & Pierre Poret, 1991. "Infrastructure and Private-Sector Productivity," OECD Economics Department Working Papers 91, OECD Publishing.
  3. Diewert, W.E., 1995. "Price and Volume Measures in the System of National Accounts," UBC Departmental Archives 95-02, UBC Department of Economics.
  4. 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.
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Cited by:
  1. Roy H. Webb, 1998. "National productivity statistics," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 45-64.
  2. Patrick Francois & Joanne Roberts, 2003. "Contracting Productivity Growth," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 59-85.
  3. Rafael Gomez & David K. Foot, 2002. "Age Structure, Income Distribution And Economic Growth," EUI-RSCAS Working Papers 36, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  4. Charles Steindel, 1997. "Measuring economic activity and economic welfare: what are we missing?," Research Paper 9732, Federal Reserve Bank of New York.
  5. Vicente Esteve, . "Política fiscal y productividad del trabajo en la economía española: Un análisis de series temporales," Studies on the Spanish Economy 156, FEDEA.
  6. John C. Haltiwanger, 1997. "Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence," Review, Federal Reserve Bank of St. Louis, issue May, pages 55-78.
  7. Božena Kadeřábková & Emilie Jašová, 2011. "Analysis of the Indicator NAIRU on the Sector Level," Politická ekonomie, University of Economics, Prague, vol. 2011(4), pages 508-525.
  8. Cassou, Steven P. & Lansing, Kevin J., 1998. "Optimal fiscal policy, public capital, and the productivity slowdown," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 911-935, June.
  9. Andreas Breitenfellner & Antje Hildebrandt, 2006. "High Employment with Low Productivity? The Service Sector as a Determinant of Economic Development," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 110-135, May.
  10. Paul A. David, 2005. "Understanding Digital Technology’s Evolution and the Path of Measured Productivity Growth: Present and Future in the Mirror of the Past," Macroeconomics 0502022, EconWPA.
  11. Pelaez, Rolando F., 2004. "Dating the productivity slowdown with a structural time-series model," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(2), pages 253-264, May.
  12. Soledad Núñez & Miguel Pérez, 2000. "La rama de servicios en España: un análisis comparado," Banco de España Working Papers 0007, Banco de España.
  13. Areendam Chanda & Carl-Johan Dalgaard, 2005. "Wage Inequality and the Rise of Services," DEGIT Conference Papers c010_016, DEGIT, Dynamics, Economic Growth, and International Trade.

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