Does the United States Have a Productivity Slowdown or a Measurement Problem?

By David M. Byrne, John G. Fernald, Marshall B. Reinsdorf. 2016

347 citations recorded by the source corpus.

After 2004, measured growth in labor productivity and total factor productivity slowed. We find little evidence that this slowdown arises from growing mismeasurement of the gains from innovation in information technology–related goods and services. First, the mismeasurement of information technology hardware is significant preceding the slowdown. Because the domestic production of these products has fallen, the quantitative effect on productivity was larger in the 1995–2004 period than since then, despite mismeasurement worsening for some types of information technology. Hence, our adjustments make the slowdown in labor productivity worse. The effect on total factor productivity is more muted. Second, many of the tremendous consumer benefits from the “new” economy such as smartphones, Google searches, and Facebook are, conceptually, nonmarket: Consumers are more productive in using their nonmarket time to produce services they value. These benefits raise consumer well-being but do not imply that market sector production functions are shifting out more rapidly than measured. Moreover, estimated gains in nonmarket production are too small to compensate for the loss in overall well-being from slower market sector productivity growth. In addition to information technology, other measurement issues that we can quantify (such as increasing globalization and fracking) are also quantitatively small relative to the slowdown.

Subfields: Economics and Econometrics, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/9335dd413294b8b63167b84c85d42968a0edfb57

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Citations in the corpus

Offshore Profit Shifting and Domestic Productivity Measurement (2017, background): “Syverson (2016) and Byrne, Fernald, and Reinsdorf (2016) argue that measurement is unlikely to explain most of the productivity slowdown.”
Gone with the Headwinds: Global Productivity (2017, background): “Byrne, Fernald, and Reinsdorf 2016 also find no increase in the measurement error for total factor productivity when its growth rate slowed.”
Underestimating the Real Growth of GDP, Personal Income and Productivity (2017, background): “(2014), Syverson (2016) and Byrne et al (2016) for a discussion of the recent productivity slowdown.”
The pre-Great Recession slowdown in productivity (2015, background): “In the 2000s, the pace of TFP gains in ICT production eased and its share in GDP declined (see Byrne, Fernald, and Reinsdorf, 2016).”
Measuring the Natural Rate of Interest: International Trends and Determinants (2016, background): “The productivity slowdown in the United States is documented by Byrne et al. (2016) and Gordon (2016), and the European productivity slowdown is analyzed in Cette et al.”