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Underestimating the Real Growth of GDP, Personal Income and Productivity

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  • Martin S. Feldstein

Abstract

The problems involved in estimating real output that I discuss in this paper cause the official government statistics to underestimate of the rates of growth of real GDP, real personal income, and productivity. That underestimation is important not just to economists trying to understand where the economy is going but also to the broader public and to the political system. The understatement of real growth reflects the enormous difficulty of dealing with quality change and the even greater difficulty of measuring the value created by the introduction of new goods and services. Despite the vast amount of attention that has been devoted to this subject in the economic literature and by the government agencies, there remains insufficient understanding of just how imperfect the official estimates actually are. It is important for economists to recognize the limits of our knowledge and to adjust public statements and policies to what we can know. This paper is not about the recent slowdown in measured productivity but that subject is discussed briefly.

Suggested Citation

  • Martin S. Feldstein, 2017. "Underestimating the Real Growth of GDP, Personal Income and Productivity," NBER Working Papers 23306, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23306
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    References listed on IDEAS

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    3. Hausman, Jerry, 1999. "Cellular Telephone, New Products, and the CPI," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 188-194, April.
    4. Diane Coyle, 2015. "GDP: A Brief but Affectionate History (Revised and Expanded Edition)," Economics Books, Princeton University Press, edition 2, number 10598.
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    7. Robert William Fogel & Enid M. Fogel & Mark Guglielmo & Nathaniel Grotte, 2013. "Political Arithmetic: Simon Kuznets and the Empirical Tradition in Economics," NBER Books, National Bureau of Economic Research, Inc, number foge12-1, January.
    8. Chad Syverson, 2017. "Challenges to Mismeasurement Explanations for the US Productivity Slowdown," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 165-186, Spring.
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    Cited by:

    1. Diewert, Erwin & FOX, Kevin J. Fox & SCHREYER, Paul, 2017. "The Digital Economy, New Products and Consumer Welfare," Microeconomics.ca working papers erwin_diewert-2017-12, Vancouver School of Economics, revised 14 Dec 2017.
    2. repec:kap:atlecj:v:45:y:2017:i:3:d:10.1007_s11293-017-9551-9 is not listed on IDEAS
    3. Robert Z. Lawrence, 2017. "Recent Manufacturing Employment Growth: The Exception That Proves the Rule," NBER Working Papers 24151, National Bureau of Economic Research, Inc.
    4. Razzak, Weshah, 2017. "International Productivity Growth Differentials Sectoral Analysis and Missing Productivity," MPRA Paper 84967, University Library of Munich, Germany, revised 06 Mar 2018.
    5. Anna M. Stansbury & Lawrence H. Summers, 2017. "Productivity and Pay: Is the link broken?," NBER Working Papers 24165, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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