Working Paper: NBER ID: w29109
Authors: Nicolas Crouzet; Janice C. Eberly
Abstract: In recent years, measured TFP growth in the US has declined. We argue that two forces contributed to this decline: the mismeasurement of intangible capital, and rising markups. Markups affect input shares, while intangibles omitted from measures of investment affect measured capital growth, each potentially generating downward bias in measured TFP growth. Most importantly, when both forces are simultaneously present, their effects reinforce each other and amplify the downward bias in measured TFP growth. Using input-output data, we estimate that this mechanism could account for one-third to two-thirds of the decline in measured TFP growth.
Keywords: productivity; intangible capital; markups; TFP growth
JEL Codes: D24; D4; E01; E22; G31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Rising markups (D43) | downward bias in TFP growth (O49) |
| Omitted intangible capital (E22) | downward bias in TFP growth (O49) |
| Rising markups (D43) | overestimation of labor share (E25) |
| Omitted intangible capital (E22) | lower measured capital stock (E22) |
| Rising markups + Omitted intangible capital (E22) | downward bias in TFP growth (O49) |
| Rising markups + Omitted intangible capital (E22) | misestimation of GDP and productivity growth (O49) |
| Omitted intangible capital <-> Rising markups (E22) | downward bias in TFP growth (O49) |