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Why are initial estimates of productivity growth so unreliable?

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  • Jacobs, Jan P.A.M.
  • van Norden, Simon

Abstract

This paper argues that initial estimates of productivity growth will tend to be much less reliable than those of most other macroeconomic aggregates, such as output or employment growth. Two distinct factors complicate productivity measurement. (1) When production increases, factor inputs typically increase as well. Productivity growth is therefore typically less variable than output growth, meaning that measurement errors will tend to be relatively more important. (2) Revisions to published estimates of production and factor inputs tend to be less highly correlated than the published estimates themselves. This further increases the impact of data revisions on published productivity estimates.

Suggested Citation

  • Jacobs, Jan P.A.M. & van Norden, Simon, 2016. "Why are initial estimates of productivity growth so unreliable?," Journal of Macroeconomics, Elsevier, vol. 47(PB), pages 200-213.
  • Handle: RePEc:eee:jmacro:v:47:y:2016:i:pb:p:200-213
    DOI: 10.1016/j.jmacro.2015.11.004
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    Cited by:

    1. Hecq, Alain & Jacobs, Jan P.A.M. & Stamatogiannis, Michalis P., 2019. "Testing for news and noise in non-stationary time series subject to multiple historical revisions," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 396-407.
    2. Saeed Zaman, 2021. "A Unified Framework to Estimate Macroeconomic Stars," Working Papers 21-23R, Federal Reserve Bank of Cleveland, revised 15 Aug 2022.
    3. Sayag, Doron & Ben-hur, Dano & Pfeffermann, Danny, 2022. "Reducing revisions in hedonic house price indices by the use of nowcasts," International Journal of Forecasting, Elsevier, vol. 38(1), pages 253-266.
    4. Croushore, Dean & Del Monaco Santos, Pedro, 2022. "The personal saving rate: Data revisions and forecasts," Economics Letters, Elsevier, vol. 219(C).
    5. Jonas Dovern & Christopher Zuber, 2020. "Recessions and Potential Output: Disentangling Measurement Errors, Supply Shocks, and Hysteresis Effects," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(4), pages 1431-1466, October.

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    More about this item

    Keywords

    Productivity; Real-time analysis; Data revisions; Greenbook projections;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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