Measuring economic activity and economic welfare: what are we missing?
Major U.S. economic data, most notably GDP and Industrial Production, are undergoing major changes. Proposals have been made for significant alterations in the CPI. The revision process has helped to spur debate on such topics as the proper method of accounting for high technology's role in the economy, the reported sluggishness of productivity growth in many service industries, and the overstatement of price increases for numerous products. This paper attempts to assess the potential impact of some of these problems on our understanding of basic trends in the economy. It is found that with even fairly generous assumptions as to the time path of errors in price data, the fundamentals of the economy's broad movements do not change: productivity and real earnings growth were likely still substantially slower in the first half of the 1990s than before 1973.
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