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Using Investment Data to Assess the Importance of Price Mismeasurement

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  • Diego Comin

    (New York University)

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, 2003. "Using Investment Data to Assess the Importance of Price Mismeasurement," Macroeconomics 0306006, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0306006
    Note: Type of Document - acrobat pdf; prepared on IBM PC ; to print on HP; pages: 38; figures: included
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    References listed on IDEAS

    as
    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.
    2. Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1, March.
    3. 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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    5. James Bessen, 2002. "Technology Adoption Costs and Productivity Growth: The Transition to Information Technology," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 443-469, April.
    6. 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.
    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.
    8. Brent R. Moulton, 2001. "The Expanding Role of Hedonic Methods in the Official Statistics of the United States," BEA Papers 0018, Bureau of Economic Analysis.
    9. Bruce W. Hamilton, 2001. "Using Engel's Law to Estimate CPI Bias," American Economic Review, American Economic Association, vol. 91(3), pages 619-630, June.
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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

    Keywords

    price mismeasurement; productivity slowdown; embodied and disembodied productivity;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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