A BEJM Topics article.

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.

Submitted: November 28, 2005 · Accepted: February 21, 2006 · Published: April 12, 2006

Originally published in Topics in Macroeconomics.

Recommended Citation

Comin, Diego A. (2006) "Using Investment Data to Assess the Importance of Price Mismeasurement," Topics in Macroeconomics: Vol. 6 : Iss. 1, Article 7.
Available at: http://www.bepress.com/bejm/topics/vol6/iss1/art7