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Do Computers Make Output Harder to Measure?

  • Robert H. McGuckin

    (The Conference Board)

  • Kevin Stiroh

    ()

    (Federal Reserve Bank of New York (formerly with The Conference Board))

In recent years, U.S. productivity growth accelerated sharply in manufacturing, but has remained sluggish in the most computer-intensive service industries. This paper explores the possibility that information technology is generating output that is increasingly hard to measure in non-manufacturing industries, which contributes to the divergence in industry productivity growth rates. Our results suggest that measurement error in 13 computer-intensive, non-manufacturing industries increased between 0.74 and 1.57 percentage points per year in the 1990s, which understates annual aggregate productivity growth by 0.10 to 0.20 percentage points in the 1990s. This adds to an estimated 0.22 to 0.30 percentage point error from the increasing share of aggregate output in these hard-to-measure industries. Thus, increasing measurement problems may understate aggregate productivity growth by an additional 0.32 to 0.50 percentage points per year in the 1990s and play an important role in understanding recent productivity trends at the industry level.

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Paper provided by The Conference Board, Economics Program in its series Economics Program Working Papers with number 00-02.

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Length: 46 pages
Date of creation: Apr 2000
Date of revision:
Publication status: Published in Journal of Technology Transfer, Vol. 26, No. 4, 2001, pages 295-321.
Handle: RePEc:cnf:wpaper:0002
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  1. Kahn, J. & Lim, J.S., 1997. "Skilled Labor-Augmenting Technical Progress in U.S. Manufacturing," RCER Working Papers 437, University of Rochester - Center for Economic Research (RCER).
  2. Donald Siegel, 1997. "The Impact Of Computers On Manufacturing Productivity Growth: A Multiple-Indicators, Multiple-Causes Approach," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 68-78, February.
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  11. Stiroh, Kevin J, 1998. "Computers, Productivity, and Input Substitution," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 175-91, April.
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  13. Zvi Griliches, 1992. "Output Measurement in the Service Sectors," NBER Books, National Bureau of Economic Research, Inc, number gril92-1.
  14. Charles Steindel, 1992. "Manufacturing productivity and high-tech investment," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 39-47.
  15. Jorgenson, D.W. & Stiroh, K., 1994. "Computers abd Growth," Harvard Institute of Economic Research Working Papers 1707, Harvard - Institute of Economic Research.
  16. 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.
  17. Joseph H. Haimowitz, 1998. "Has the surge in computer spending fundamentally changed the economy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 27-42.
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