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Effects of Terms of Trade Gains and Tariff Changes on the Measurement of US Productivity Growth

Author

Listed:
  • Robert C. Feenstra
  • Benjamin R. Mandel
  • Marshall B. Reinsdorf
  • Matthew J. Slaughter

Abstract

The acceleration in US productivity growth since 1995 is often attributed to declining prices for information technology (IT ) goods, and therefore enhanced productivity growth in that sector. We investigate an alternative explanation for these IT price movements: gains in the US terms of trade and tariff reductions, especially for IT products, which led to greater gains than shown by official indexes. We do not, however, investigate the indexes used to deflate the domestic absorption components of GDP, and if upward biases are present in those indexes that could offset some of the effects of mismeasured export and import indexes. (JEL C43, E23, F13, F14, J24)

Suggested Citation

  • Robert C. Feenstra & Benjamin R. Mandel & Marshall B. Reinsdorf & Matthew J. Slaughter, 2013. "Effects of Terms of Trade Gains and Tariff Changes on the Measurement of US Productivity Growth," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 59-93, February.
    • Handle: RePEc:aea:aejpol:v:5:y:2013:i:1:p:59-93
    Note: DOI: 10.1257/pol.5.1.59
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    More about this item

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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