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The Productivity Slowdown: Is A Growing Unmeasurable Sector The Culprit?

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  • Daniel E. Sichel

Abstract

The productivity slowdown of the early 1970s continues to puzzle economists. A frequent explanation of this puzzle is that mismeasurement of output has worsened enough to help account for the apparent shortfall of output growth. Griliches (1994) highlighted one channel through which this worsening measurement could occur. He raised the possibility that—because output growth in the service sector likely is undermeasured—the rising share of services has led to greater undermeasurement of overall economic growth. This paper demonstrates that this argument is of little quantitative significance. Even under assumptions most favorable to the hypothesis, the rising share of services has had only a small impact on measurement error. These results—along with evidence from Baily and Gordon (1988)—make mismeasurement of output an improbable explanation for the productivity slowdown in aggregate data. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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  • Daniel E. Sichel, 2000. "The Productivity Slowdown: Is A Growing Unmeasurable Sector The Culprit?," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 367-370, August.
  • Handle: RePEc:tpr:restat:v:79:y:2000:i:3:p:367-370
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    Cited by:

    1. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    2. McGuckin, Robert H & Stiroh, Kevin J, 2001. "Do Computers Make Output Harder to Measure?," The Journal of Technology Transfer, Springer, vol. 26(4), pages 295-321, October.
    3. Soledad Núñez & Miguel Pérez, 2000. "La rama de servicios en España: un análisis comparado," Working Papers 0007, Banco de España;Working Papers Homepage.
    4. Charles Steindel, 1999. "The impact of reduced inflation estimates on real output and productivity growth," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 5(Jun).
    5. Charles Steindel & Kevin J. Stiroh, 2001. "Productivity: what is it and why do we care about it?," Staff Reports 122, Federal Reserve Bank of New York.
    6. 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.
    7. Franck Paolucci, 2007. "Des contraintes aux contributions des investissements en R&D aux Etats-Unis," Documents de Travail de l'OFCE 2007-16, Observatoire Francais des Conjonctures Economiques (OFCE).

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