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Possible measurement bias in aggregate productivity growth
February 1999, Vol. 122, No. 2
William Gullickson and Michael J. Harper
Output per hour in the business sector has grown about 1 percent per year since the late 1970s, according to data published by the Bureau of Labor Statistics. Some scholars in the productivity research field have suggested, however, that productivity might have grown faster.
One line of reasoning that supports this faster growth theory hinges on the decomposition of productivity trends by industry. When business sector output and hours are allocated to manufacturing and nonmanufacturing, the nonmanufacturing trend in output per hour appears to be very low. When output and hours are further allocated by industry, some of the resulting productivity trends appear to be negative. These trends are difficult to reconcile with anecdotal evidence of productivity improvements.
This article sheds some new light on these issues by using measures of multifactor productivity. The multifactor productivity framework is well suited to sorting out many of the issues because it allows us to account for capital inputs and for intermediate flows between industries. With these measures, we can compare industry and sectoral productivity trends.
This excerpt is from an article published in the February 1999 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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