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Why are initial estimates of productivity growth so unreliable?

Citation

Jacobs, JPAM and van Norden, S, Why are initial estimates of productivity growth so unreliable?, Journal of Macroeconomics, 47 pp. 200-213. ISSN 0164-0704 (2016) [Refereed Article]

Copyright Statement

2015 Elsevier Inc. All rights reserved.

DOI: doi:10.1016/j.jmacro.2015.11.004

Abstract

This paper argues that initial estimates of productivity growth will tend to be much less reliable than those of most other macroeconomic aggregates, such as output or employment growth. Two distinct factors complicate productivity measurement. (1) When production increases, factor inputs typically increase as well. Productivity growth is therefore typically less variable than output growth, meaning that measurement errors will tend to be relatively more important. (2) Revisions to published estimates of production and factor inputs tend to be less highly correlated than the published estimates themselves. This further increases the impact of data revisions on published productivity estimates.

To assess the extent of these problems in practice, we detail the importance of historical revisions to the most commonly-used measures of US aggregate productivity growth, expanding on previous empirical work by Aruoba (2008) and Anderson and Kliesen (2006). We find that such revisions have contributed substantially to policymakers' forecast errors for US productivity growth.

Item Details

Item Type:Refereed Article
Keywords:productivity, real-time analysis, data revisions, Greenbook projections
Research Division:Economics
Research Group:Applied Economics
Research Field:Macroeconomics (incl. Monetary and Fiscal Theory)
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Fiscal Policy
Author:Jacobs, JPAM (Dr Jan Jacobs)
ID Code:118720
Year Published:2016
Deposited By:Economics and Finance
Deposited On:2017-07-18
Last Modified:2017-10-23
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