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Using Investment Data to Assess the Importance of Price Mismeasurement
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Diego A Comin
Published/Copyright:
April 12, 2006
Abstract
This paper presents a new approach to assess the role of price mismeasurement in the productivity slowdown. I invert the firm’s investment decision to identify the embodied and disembodied components of productivity growth. With a Cobb-Douglas production function, output price mismeasurement only should affect the latter. Contrary to the mismeasurement hypothesis, I find that in the Post-War period, disembodied productivity grew faster in the hard-to-measure than in the non-manufacturing easy-to-measure sectors, and that disembodied productivity slowed down less in the hard-to-measure than in the easy-to-measure sectors since the 70’s. These results hold a fortiori when capital and labor are complements.
Keywords: investment; price mismeasurement; productivity slowdown; total factor productivity; embodied and disembodied productivity
Published Online: 2006-04-12
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Keywords for this article
investment;
price mismeasurement;
productivity slowdown;
total factor productivity;
embodied and disembodied productivity
Articles in the same Issue
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- Frontiers Article
- 10.2202/1534-6013.1320
- Advances Article
- Monetary Policy and Uncertainty about the Natural Unemployment Rate: Brainard-Style Conservatism versus Experimental Activism
- Quantifying the Effects of the Demographic Transition in Developing Economies
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- A Closed Form Solution to the Ramsey Model
- Convergence and Stability in U.S. Employment Rates
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- Consumption and Health
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