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Using Investment Data to Assess the Importance of Price Mismeasurement

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  • Comin Diego A

    (NYU)

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.

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  • Comin Diego A, 2006. "Using Investment Data to Assess the Importance of Price Mismeasurement," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-42, April.
    • Handle: RePEc:bpj:bejmac:v:topics.6:y:2006:i:1:n:7
    DOI: 10.2202/1534-5998.1396
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    Cited by:

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    2. Bruno Tissot & Les Skoczylas, 2005. "Revisiting recent productivity developments across OECD countries," BIS Working Papers 182, Bank for International Settlements.

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    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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