Accomplishment Based Research: Substantive and Measurement Issues in the Productivity Growth Slowdown

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The United States is now reaching the end of its second decade of virtually zero growth in productivity in the service sector. The purpose of this research is to determine and analyze the reasons for this unsatisfactory performance, with its threatening implications for the future growth of the American standard of living. This project is divided into three major components. The first consists of an international comparison of differences in productivity measurement-methods. Some facts of measurement favor the U.S., particularly in the manufacturing sector, where the U.S. is almost unique in its use of a hedonic price index for computers. Other considerations help to account for a poor U.S. performance and the more favorable foreign performance in non- manufacturing, particularly the greater use in foreign accounts of physical measures of output in such industries as construction, transportation, banking, and finance. This research will develop a coherent account of differences in measurement methods in the U. S. and four other leading nations. The second part of the project analysis the causes for the differences productivity performance, particularly the hypothesis that labor in U.S. service industries is poorly paid, leading to a high use of labor relative to some European countries where the relative wage in the services is higher and the use of labor relatively lower. The hypothesis will be tested in a comparison of wage and productivity performance across industries and countries. The final component will consist of detailed studies of individual U.S. industries which raise a combination of measurement and substantive issues. Building on previous work that yielded new insights on productivity behavior in the U.S. transportation and utility industries, this part of the project will focus on banking, finance, and retailing.