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Discussion Paper
The Mysterious Slowdown in U.S. Manufacturing Productivity
Throughout the twentieth century, steady technological and organizational innovations, along with the accumulation of productive capital, increased labor productivity at a steady rate of around 2 percent per year. However, the past two decades have witnessed a slowdown in labor productivity, measured as value added per hour worked. This slowdown has been particularly stark in the manufacturing sector, which historically has been a leading sector in driving the productivity of the aggregate U.S. economy. What makes this slowdown particularly puzzling is the fact that manufacturing accounts for ...
Discussion Paper
Measuring Price Inflation and Growth in Economic Well-Being with Income-Dependent Preferences
How can we accurately measure changes in living standards over time in the presence of price inflation? In this post, I discuss a novel and simple methodology that uses the cross-sectional relationship between income and household-level inflation to construct accurate measures of changes in living standards that account for the dependence of consumption preferences on income. Applying this method to data from the U.S. suggests potentially substantial mismeasurements in our available proxies of average growth in consumer welfare in the U.S.
Discussion Paper
Understating Rising Quality Means Import Price Inflation Is Overstated
It is common for price measures to consider changes in quality. That is, a price index might fall even though listed prices are unchanged because the quality of the item has improved. An adjustment for quality captures the fact that consumers are effectively getting more for the same dollar when product quality rises. In practice, however, it is notoriously difficult to measure quality changes since it requires access to detailed data on all product characteristics that matter to consumers. We offer a novel method to infer quality changes and apply it to U.S. import price indices. When we ...
Discussion Paper
The R&D Puzzle in U.S. Manufacturing Productivity Growth
In a previous post, we provided evidence for a broad-based slowdown in productivity growth across industries and firms in the U.S. manufacturing sector starting in 2010. Since firms’ investment in research and development (R&D) for new technologies constitutes a central driver of productivity growth, in this post we ask if the observed slowdown in productivity may be due to a decline in R&D. We find that “R&D intensity” has been increasing at both the firm and industry level, even as productivity growth declines. This points to a decline in the effectiveness of R&D in generating ...