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Lessons from the Latest Data on U.S. Productivity

Lessons from the Latest Data on U.S. Productivity

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Productivity growth is carefully scrutinized by macroeconomists because it plays key roles in understanding private savings behaviour, the sources of macroeconomic shocks, the evolution of international competitiveness and the solvency of public pension systems, among other things. However, estimates of recent and expected productivity growth rates suffer from two potential problems: (i) recent estimates of growth trends are imprecise, and (ii) recently published data often undergo important revisions.

This paper documents the statistical (un)reliability of several measures of aggregate productivity growth in the U.S. by examining the extent to which they are revised over time. The authors also examine the extent to which such revisions contribute to errors in forecasts of U.S. productivity growth.

The authors find that data revisions typically cause appreciable changes in published estimates of productivity growth rates across a range of different productivity measures. Substantial revisions often occur years after the initial data release, which they argue contributes significantly to the overall uncertainty policymakers face.

This emphasizes the need for means of reducing the uncertainty facing policymakers and policies robust to uncertainty about current economic conditions.
Productivity growth is carefully scrutinized by macroeconomists because it plays key roles in understanding private savings behaviour, the sources of macroeconomic shocks, the evolution of international competitiveness and the solvency of public pension systems, among other things. However, estimates of recent and expected productivity growth rates suffer from two potential problems: (i) recent estimates of growth trends are imprecise, and (ii) recently published data often undergo important revisions.

This paper documents the statistical (un)reliability of several measures of aggregate productivity growth in the U.S. by examining the extent to which they are revised over time. The authors also examine the extent to which such revisions contribute to errors in forecasts of U.S. productivity growth.

The authors find that data revisions typically cause appreciable changes in published estimates of productivity growth rates across a range of different productivity measures. Substantial revisions often occur years after the initial data release, which they argue contributes significantly to the overall uncertainty policymakers face.

This emphasizes the need for means of reducing the uncertainty facing policymakers and policies robust to uncertainty about current economic conditions.

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Published by: Federal Reserve Bank of Philadelphia on Feb 02, 2011
Copyright:Attribution Non-commercial

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11/14/2011

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WORKING PAPER NO. 11-1LESSONS FROM THE LATEST DATAON U.S. PRODUCTIVITY
Jan P.A.M. JacobsUniversity of Groningen, CAMA, and CIRANOandSimon van NordenHEC Montreal, CIRANO, and CIREQ, andVisiting Scholar, Federal Reserve Bank of PhiladelphiaDecember 2010
 
Lessons from the Latest Data onU.S. Productivity
Jan P.A.M. Jacobs
University of Groningen, CAMA and CIRANO
Simon van Norden
HEC Montr´eal, CIRANO and CIREQ
December 2010
The views expressed here are those of the authors and do not necessarily reflect the viewsof the Federal Reserve Bank of Philadelphia or the Federal Reserve System. This paper isavailable free of charge at
www.philadelphiafed.org/research-and-data/publications/working-papers/
.
 
Abstract
Productivity growth is carefully scrutinized by macroeconomists be-cause it plays key roles in understanding private savings behaviour,the sources of macroeconomic shocks, the evolution of internationalcompetitiveness and the solvency of public pension systems, amongother things. However, estimates of recent and expected productivitygrowth rates suffer from two potential problems: (i) recent estimatesof growth trends are imprecise, and (ii) recently published data oftenundergo important revisions.This paper documents the statistical (un)reliability of several meas-ures of aggregate productivity growth in the US by examining theextent to which they are revised over time. We also examine the ex-tent to which such revisions contribute to errors in forecasts of USproductivity growth.We find that data revisions typically cause appreciable changes inpublished estimates of productivity growth rates across a range of dif-ferent productivity measures. Substantial revisions often occur yearsafter the initial data release, which we argue contributes significantlyto the overall uncertainty policymakers face.This emphasizes the need for means of reducing the uncertaintyfacing policymakers and policies robust to uncertainty about currenteconomic conditions.
JEL classification:
C22, J24, O47
Keywords:
productivity, real-time analysis, data revisions, Greenbookprojections

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