About THE PRODUCTIVITY MEASUREMENT Initiative
After nearly a decade of strong productivity growth starting in the mid-1990s, there has been much slower growth since then. Output per hour worked in the US business sector has grown at only 1.3 percent a year over the period 2004 to 2015; and growth has been even slower from 2010 to 2015, at just 0.5 percent a year. These rates are only half or less of the pace of growth achieved in the past. The United States is not alone in facing this problem, as all of the major advanced economies have also seen slow productivity growth. This growth weakness has been a major determinant of weak overall GDP growth, stagnation in real wages and household incomes and it strongly impacts government revenues and the deficit.
There is a continuing debate about how much of this slowdown is real and how much it reflects the increasing inadequacy of our official measures. That debate has refocused attention on the shortcomings of the measures, the challenges – both conceptual and resource-related – that the statistical agencies confront and the need to keep pace with a rapidly evolving economy in which, for instance, a cell phone now doubles as a camera, a map, a radio, etc. More accurate measurement of productivity growth is important both to further better public understanding of what’s going on in the economy, and to guide policymakers as they shape policies to improve future living standards and evaluate the effects of past policies.
The Hutchins Center’s Productivity Measurement Initiative responds to the need and appetite for (a) examination and clarification of the concepts, purpose and relevance to policy debates of the “output” that comprises the numerator in the productivity measure, e.g. GDP vs welfare and (b) particular attention to the difficult measurement issues in rapidly changing, harder-to-measure and growing sectors of the economy, e.g. health care and information services.
Call for Papers
We are planning to commission papers for five conferences to be held over the next 18 months on a range of issues in productivity measurement (tentatively: March 2019, June 2019, September 2019, November 2019, January 2020). We are offering honoraria of up to $20,000 per accepted paper. Authors are welcome to submit papers to journals or to have them considered for publication in a planned Brookings volume.
We are looking for papers that use new methods or new data to provide some guide to the magnitude of the mismeasurement using current practices, as well as suggestions on how BLS and BEA might improve methods in the future. We are open to a wide variety of papers, from ones that might improve measurement in a narrow area to ones that are more far ranging and exploratory. We encourage economists who have not written about measurement before to consider working in the area. Our interest is primarily in the U.S., but we are interested in learning from other countries and from international comparisons.
Two papers have already been written for the project. Brent Moulton reviewed the changes that have been made to official price measures over the past 20 years: “The Measurement of Output, Prices and Productivity: What’s Changed Since the Boskin Commission?” And Karen Dynan of Harvard and Louise Sheiner discuss the conceptual issues in measuring output in “GDP as a Measure of Economic Well-Being”. We have also commissioned a paper examining the measurement of construction industry productivity by Austan Goolsbee and Chad Syverson of the University of Chicago and Leo Sveikauskas and his colleagues at the BLS.
Although we are interested in any aspect of productivity measurement, we are particularly interested in proposals that address the following areas:
Government sector: The U.S. national accounts assume that there is no productivity growth in the sector: output is measured by inputs. How could government productivity be measured? How much has productivity been mismeasured because of this assumption? How has this source of mismeasurement changed over time?
Health care: The health sector is a large and growing share of the economy, fueled both by population aging and per capita health spending that rises faster than GDP. Despite the rapid technological change, the price statistics make almost no attempt to adjust for changes in quality over time, yet research shows that such quality adjustments could have major effects on measured prices, output, and productivity.
Digital economy: The digital economy includes everything from Facebook and Google to Task Rabbit, Lyft, online shopping, and cloud computing services. These innovations are accompanied by a host of measurement challenges, both conceptual and technical. At the same time, they offer the possibility of providing much better data with which to answer them. We welcome submissions that attempt to both measure the productivity or output of the digital economy, as well as papers that use big data to improve measurement in other areas.
International sector: Globalization presents some well known measurement problems. In particular, import prices may not appropriately capture price declines when firms shift from higher-priced to lower-priced foreign suppliers, it can be difficult to attribute production by country when production takes place through global value chains, and tax considerations may lead to deliberate distortions in the data.
Finance and Insurance: There is a longstanding and unresolved conceptual debate about how the output of the finance and insurance sectors should be measured. With these sectors growing in size and complexity over time, measuring output incorrectly could have increasing consequences for productivity measurement.
New services and professional services. Services are heterogeneous, and each type of service poses its own measurement challenges. For example, what is the right unit for measurement of professional services to households (e.g., legal services), and how could that measurement be improved? What needs to be done to ensure correct measurement of new market-based services associated with the gig economy, such as Airbnb and ridesharing?
Housing: Housing services represent about 15 percent of consumption, and about three-quarters of those services are imputed. What are the conceptual issues related to measuring housing services? What data are currently being used to measure housing services, and what measurement biases might result?
Retail consumer sector (clothing, shoes, etc.): Does the use of the matched model lead to the overstatement of inflation? Do producers use the introduction of new models to raise prices, leading to an understatement of the CPI from the matched model? How do discounts on last year’s models affect measured inflation? How has outlet substitution bias changed with the advent of online shopping?
The deadline for proposals is October 1. Proposals should be one to two pages and include links to relevant work that the prospective author has done previously. Our plan is to solicit a broad range of papers, and then to group them by subject matter (if possible) into separate short conferences. We expect that papers already underway can be ready for the earlier conferences, and completely new papers may need more time. We are also likely to reissue the call for papers later this year so please let us know if you think you might want to submit one but are not quite ready to do so by October 1. Proposals should indicate which conference months seem likely to work. Once the papers are chosen, we will work with authors and panelists to find specific dates.
Authors selected to present papers will be notified by November 1. We welcome submissions from scholars who are early in their careers and those who are from groups under-represented in the economics profession. Please share this call for papers with your colleagues. Please send responses to Haowen Chen at firstname.lastname@example.org.
If you have any questions, please contact Louise Sheiner at email@example.com.
PRODUCTIVITY MEASUREMENT Oversight panel
Ufuk Akcigit, University of Chicago
Martin Baily, Center on Regulation and Markets, Brookings
David Byrne, Federal Reserve Board
Carol Corrado, The Conference Board
Karen Dynan, Harvard and Peterson Institute for International Economics
Martin Fleming, IBM
Jan Hatzius, Goldman Sachs
Benjamin Jones, Kellogg School of Management, Northwestern University
Charles Jones, Graduate School of Business, Stanford University
Mekala Krishnan, McKinsey Global Institute
Marshall Reinsdorf, International Monetary Fund
Robert Seamans, Stern School of Business, New York University
Louise Sheiner, Hutchins Center on Fiscal and Monetary Policy, Brookings*
James Stock, Harvard Kennedy School*
David Wessel, Hutchins Center on Fiscal and Monetary Policy, Brookings
Janet Yellen, Hutchins Center on Fiscal and Monetary Policy, Brookings*
*Denotes panel co-chair
GDP as a measure of economic well-being (Read the full report here »)
Authors: Karen Dynan (Havrvard University and Peterson Institute for International Economics) and Louise Sheiner (Hutchins Center on Fiscal & Monetary Policy, Brookings Institution)
The measurement of output, prices, and productivity: What’s changed since the Boskin Commission? (Read the full report here »)
Author: Brent Moulton (formerly of BEA)
Measuring inflation: What’s changed over the past 20 years? What hasn’t? (Read blog here »)
Authors: Finn Schuele, David Wessel (Hutchins Center on Fiscal & Monetary Policy, Brookings Institution)