Using Investment Data to Assess the Importance of Price Mismeasurement
This paper presents a new approach to assess the role of price mismeasurement in the productivity slowdown. I invert the firm's investment decision to identify the embodied and disembodied components of productivity growth. With a Cobb-Douglas production function, output price mismeasurement only should affect the latter. Contrary to the mismeasurement hypothesis, I find that in the Post-War period, disembodied productivity grew faster in the hard-to-measure than in the non-manufacturing easy-to-measure sectors, and that disembodied productivity slowed down less in the hard-to-measure than in the easy-to-measure sectors since the 70's. These results hold a fortiori when capital and labor are complements.
Comin, Diego A. "Using Investment Data To Access The Importance Of Price Mismeasurement." B.E. Journal of Macroeconomics, 2006, v6(1), Article 7. citation courtesy of