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Discussion Paper
Measuring Price Inflation and Growth in Economic Well-Being with Income-Dependent Preferences
How can we accurately measure changes in living standards over time in the presence of price inflation? In this post, I discuss a novel and simple methodology that uses the cross-sectional relationship between income and household-level inflation to construct accurate measures of changes in living standards that account for the dependence of consumption preferences on income. Applying this method to data from the U.S. suggests potentially substantial mismeasurements in our available proxies of average growth in consumer welfare in the U.S.
Discussion Paper
The Mysterious Slowdown in U.S. Manufacturing Productivity
Throughout the twentieth century, steady technological and organizational innovations, along with the accumulation of productive capital, increased labor productivity at a steady rate of around 2 percent per year. However, the past two decades have witnessed a slowdown in labor productivity, measured as value added per hour worked. This slowdown has been particularly stark in the manufacturing sector, which historically has been a leading sector in driving the productivity of the aggregate U.S. economy. What makes this slowdown particularly puzzling is the fact that manufacturing accounts for ...