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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: Mar 1996
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Publication status: published as Productivity and Growth, edited by Palle Andersen, Jacqueline Dwyer and David Gruen, Proceedings of a Conference, Economic Group, Reserve Bank of Australia, pp. 139-166 (1995)
Handle: RePEc:nbr:nberwo:5519

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  1. W. Erwin Diewert, 1995. "Price and Volume Measures in the System of National Accounts," NBER Working Papers 5103, National Bureau of Economic Research, Inc.
  2. 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.
  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. Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1, June.
  5. Zvi Griliches, 1992. "Introduction to "Output Measurement in the Service Sectors"," NBER Chapters, in: Output Measurement in the Service Sectors, pages 1-22 National Bureau of Economic Research, Inc.
  6. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557.
  7. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
  8. Robert J. Gordon, 1995. "Is There a Tradeoff between Unemployment and Productivity Growth?," NBER Working Papers 5081, National Bureau of Economic Research, Inc.
  9. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, June.
  10. Robert Ford & Pierre Poret, 1991. "Infrastructure and Private-Sector Productivity," OECD Economics Department Working Papers 91, OECD Publishing.
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Cited by:
  1. Patrick Francois & Joanne Roberts, 2000. "Contracting Productivity Growth," Working Papers jorob-99-02, University of Toronto, Department of Economics.
  2. Vicente Esteve, 2004. "Política fiscal y productividad del trabajo en la economía española: un análisis de series temporales," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 19(1), pages 3-29, June.
  3. Mary Gregory & Giovanni Russo, 2004. "The Employment Impact of Differences in Dmand and Production," DEMPATEM Working Papers wp10, AIAS, Amsterdam Institute for Advanced Labour Studies.
  4. Rafael Gomez & David K. Foot, 2003. "Age Structure, Income Distribution and Economic Growth," Canadian Public Policy, University of Toronto Press, vol. 29(s1), pages 141-162, January.
  5. Wachter, Till von, 2001. "Employment and productivity growth in service and manufacturing sectors in France, Germany and the US," Working Paper Series 0050, European Central Bank.
  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. 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.
  8. 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.
  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.
  10. 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.
  11. Roy H. Webb, 1998. "National productivity statistics," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 45-64.
  12. Charles Steindel, 1997. "Measuring economic activity and economic welfare: what are we missing?," Research Paper 9732, Federal Reserve Bank of New York.
  13. David, P.A., 2000. "Understanding Digital Technology's Evolution and the Path of Measured Productivity Growth: Present and Future in the Mirror of the Past," Papers 99-011, United Nations World Employment Programme-.
  14. Messina, Julian, 2006. "The role of product market regulations in the process of structural change," European Economic Review, Elsevier, vol. 50(7), pages 1863-1890, October.
  15. Sultan, Muyed, 2008. "The Tertiary Sector Is Going to Dominate the World Economy; Should We Worry?," MPRA Paper 14681, University Library of Munich, Germany.
  16. Soledad Núñez & Miguel Pérez, 2000. "La rama de servicios en España: un análisis comparado," Banco de Espa�a Working Papers 0007, Banco de Espa�a.
  17. 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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