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On the Sensitivity of Aggregate Productivity Growth Rates to Noisy Measurement

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  • Frank T. Denton

Abstract

Aggregate rates of productivity growth are among the most closely watched indicators of economic performance. They are also among the most difficult to measure accurately. This paper explores the sensitivity of such rates to random measurement error using a simple generic model. The model allows for errors in the input and output components of the productivity ratio, with different variances, and for serial and cross correlation of the errors. The effects of the errors are considered from the point of view of growth rates themselves, changes in growth rates, and comparisons between rates in different countries.

Suggested Citation

  • Frank T. Denton, 2007. "On the Sensitivity of Aggregate Productivity Growth Rates to Noisy Measurement," Social and Economic Dimensions of an Aging Population Research Papers 192, McMaster University.
    • Handle: RePEc:mcm:sedapp:192
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    File URL: http://socserv.mcmaster.ca/sedap/p/sedap192.pdf
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    References listed on IDEAS

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    1. W. Erwin Diewert & Kevin J. Fox, 1999. "Can measurement error explain the productivity paradox?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 251-280, April.
    2. Michael C. Lovell, 1963. "Seasonal Adjustment of Economic Time Series and Multiple Regression," Cowles Foundation Discussion Papers 151, Cowles Foundation for Research in Economics, Yale University.
    3. Johannes Van Biesebroeck, 2007. "Robustness Of Productivity Estimates," Journal of Industrial Economics, Wiley Blackwell, vol. 55(3), pages 529-569, September.
    4. Baldwin, John R. Maynard, Jean-Pierre Tanguay, Marc Wong, Fanny Yan, Beiling, 2005. "A Comparison of Canadian and U.S. Productivity Levels: An Exploration of Measurement Issues," Economic Analysis (EA) Research Paper Series 2005028e, Statistics Canada, Analytical Studies Branch.
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    Keywords

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    JEL classification:

    • 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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