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Why Is Manufacturing Productivity Growth So Low?

Author

Listed:
  • Enghin Atalay
  • Ali Hortacsu
  • Nicole Kimmel
  • Chad Syverson

Abstract

We examine the recent slow growth in manufacturing productivity. We show that nearly all measured TFP growth since 1987 — and its post-2000s decline — comes from a few computer-related industries. We argue conventional measures understate manufacturing productivity growth by failing to fully capture quality improvements. We compare consumer to producer and import price indices. In rapidly changing industries, consumer price indices indicate less inflation, suggesting mismeasurement in standard industry deflators. Using an input-output framework, we estimate that TFP growth is understated by 1.4 percentage points in durable manufacturing and 0.3 percentage points in nondurable manufacturing and is slightly overstated in nonmanufacturing industries.

Suggested Citation

  • Enghin Atalay & Ali Hortacsu & Nicole Kimmel & Chad Syverson, 2026. "Why Is Manufacturing Productivity Growth So Low?," Working Papers 26-19, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:103003
    DOI: 10.21799/frbp.wp.2026.19
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    File URL: https://www.philadelphiafed.org/-/media/FRBP/Assets/working-papers/2026/wp26-19.pdf
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    Keywords

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    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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