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Working Paper
Why Is Manufacturing Productivity Growth So Low?
We examine the recent slow growth in manufacturing productivity. We show that nearly all measured TFP growth since 1987 — and its post-2000s decline — comes from a few computer-related industries. We argue conventional measures understate manufacturing productivity growth by failing to fully capture quality improvements. We compare consumer to producer and import price indices. In rapidly changing industries, consumer price indices indicate less inflation, suggesting mismeasurement in standard industry deflators. Using an input-output framework, we estimate that TFP growth is understated ...
Working Paper
Quality Adjustment in Industry Deflators Strengthens Estimated Innovation–Productivity Relationships
How do investments in innovation translate into future productivity growth? Empirically answering this question is challenging. R&D spending is an observed input into the innovation process, but mapping it to productivity growth requires assumptions about the depreciation of R&D capital, gestation lags, and how well such expenditures capture true innovative effort (Hall, 2007). Patents, an alternative measure, capture successful innovations but vary widely in novelty (Kelly et al., 2021) and economic value (Kogan et al., 2017). Firms may forgo patenting to preserve secrecy, while others ...