Economic Mismeasurement and the Bias in Policy Choice

The level of economic activity is never measured perfectly because of problems of definition, inaccuracies in data collection, and the existence of the hidden economy. Such mismeasurement implies that government policies based on official statistics can be optimal only by chance. The analysis formalizes this observation in a two-sector economy and attempts to quantify the direction and extent of the bias introduced into policy by the failure to account for the true size of the economy. It is shown that short-term reform (which need not balance the government budget) can be detrimental. When a budget constraint is imposed, this ensures that reforms will be beneficial no matter how bad is the mismeasurement.     

Quantifying Bias and Inaccuracy of Upper-Level Aggregation in the Harmonised Index of Consumer Prices for Germany and the Euro Area

Current measurement practices of the Harmonised Index of Consumer Prices (HICP) produce an upward bias of about one-ninth of a percentage point in German inflation due to changing consumption being disregarded and preliminary data being used in the compilation of expenditure weights. The statistical uncertainty produced by these sources of mismeasurement can be illustrated by an interdecile range of about one-quarter of a percentage point. The annual updating of the quantity component of the weights, implemented in 2012, has reduced the substitution component, making the disregard of changing consumption virtually a non-issue for the euro area HICP. The measurement of the German HICP is impaired by the extrapolation of expenditure weights. The use of preliminary national accounts data since 2012 has not led to an improvement. This source of mismeasurement is likely to be relevant for the euro area HICP as well but cannot be quantified due to data constraints.     

Measuring Educational Heterogeneity And Labor Quality: A Note

This paper investigates the magnitude of the mismeasurement that occurs when only a few education categories are used in the construction of a constant quality index for labor input. By employing a very comprehensive data set it is found that the error resulting from the omission of information on education is relatively small. The empirical results are thus supportive of the current state of practice of constructing indices of constant quality labor input.     

Low skill wages and mismeasured inflation

The current literature presents evidence that the real wage of male workers at the 10th percentile of the wage distribution has fallen since 1970. Yet, contributions within this literature deflate nominal wages using a mismeasured deflator. Another strand of literature documents that the mismeasurement of the deflator is sizable, with recent estimates exceeding0.6 percentage points per year. In this paper, I adjust the deflator and reestimate the implied evolution of male low skill wages. This simple exercise implies that male low skill wages were about 15 log-points higher in 2013 than in 1970.     

Measurement and Allocation of Capital Inputs With Taxes: A Sensitivity Analysis for OECD Countries

Taxes affect the measurement of capital inputs. The paper provides an assessment of these impacts in a cross‐country framework where heterogeneity of corporate taxation across industries and asset types is accounted for. The results show that taxes change the relative prices of capital types, which, in turn, has implications on the estimated capital quality and reallocation effects in the traditional growth accounting framework. Omitting tax parameters is a source of mismeasurement, particularly when the rental price of capital assets is constructed using an external rate of return, leading to biased capital costs and profits rates. It is shown that differential taxation results in a deadweight loss in terms of misallocated capital inputs, predominantly due to composition effects within industries.     

Recessions and Potential Output: Disentangling Measurement Errors,Supply Shocks,and Hysteresis Effects*

This paper investigates expert revisions of potential output (PO) estimates following recessions. Using data from the Organisation for Economic Co-operation and Development (OECD), we show that downward revisions are substantial, permanent, and mostly driven by supply shocks. In contrast, PO estimates do not significantly react to demand shocks. Revisions are also partly caused by mismeasurement of PO before recessions. In particular, we show that the length of the preceding boom and pre-recession values of the current account balance and credit volumes are correlated with post-recession PO revisions. Our results call for improved methods for estimating PO and provide evidence against the existence of substantial hysteresis following demand shocks.     

Mismeasurement of Distance Effects: The Role of Internal Location of Production

The estimated effects of distance in empirical international trade regressions are unrealistically high. Using state‐and‐sector level US exports data, this paper shows analytically and proves empirically that ignoring the internal location of production (of international exports), which leads to the overestimation of distance effects by about twofold, is a possible explanation. This overestimation is mostly attributed to the mismeasurement of the distance elasticity of trade costs when internal locations of production are ignored. A corrective distance index is proposed to avoid such mismeasurements and is shown to work well for the median sector. The results are robust to the consideration of alternative estimation methodologies and data sets.     

Is there a quality bias in the Canadian CPI? Evidence from microdata

Rising consumer prices may reflect shifts by consumers to new higher‐priced products, mostly for durable and semi‐durable goods. I apply Bils’ (2009) methodology to newly available Canadian consumer price data for non‐shelter goods and services to estimate how price increases can be divided between quality growth and price inflation. I find that less than one third of observed price increases during model changeovers should be attributed to quality growth. This implies overall price inflation close to inflation measured by the official index. I conclude that, according to Bils’ methodology, the quality bias is not an important source of potential mismeasurement of CPI inflation in Canada.     

Revisiting the Relationship between Ethnic Diversity and Preferences for Redistribution: Comment

In this paper, we revisit the question raised in Dahlberg et al. ( 2012 , Journal of Political Economy 120, 41–76) concerning a causal relationship between ethnic diversity and preferences for redistribution. We find that their results are based on (i) an unreliable and potentially invalid measure of preferences for redistribution, (ii) an endogenously selected sample, and (iii) a mismeasurement of the refugee placement program. Correcting for any of these three problems reveals that there is no evidence of any relationship between ethnic diversity and preferences for redistribution. We also discuss what is currently known about the refugee placement program, and to what extent it can be used for estimating causal effects more generally.     

HOW BIASED ARE MEASURES OF CYCLICAL MOVEMENTS IN PRODUCTIVITY AND HOURS?

The movement of hours worked over the business cycle is an important input into the estimation of many key parameters in macroeconomics. Unfortunately, the available data on hours do not correspond precisely to the concept required for accurate inference. We study one source of mismeasurement—that the most commonly used source data measure hours paid instead of hours worked. In particular, we focus our attention on salaried workers, a group for whom the gap between hours paid and hours worked is likely to be large. We show that the measurement gap varies significantly and positively with changes in labor demand. As a result, we estimate that the standard deviations of the workweek and of total hours worked are 27 and 5 percent larger, respectively, than published measures of hours suggest. We also find that this measurement gap is unlikely to be the source of the acceleration in published measures of productivity in the early 2000s.     

Is Embodied Technology the Result of Upstream R&D? Industry-Level Evidence

This paper provides an exploratory analysis of whether data on the research and development (R&D) spending directed at particular technological/product fields can be used to measure industry-level capital-embodied technological change. Evidence from the patent literature suggests that the R&D directed at a product, as the main input into the “innovation” production function, is proportional to the value of the innovations in that product. I confirm this hypothesis by showing that the decline in the relative price of a good is positively correlated with the R&D directed at that product. The hypothesis implies that the technological change, or innovation, embodied in an industry's capital is proportional to the R&D that is done (“upstream”) by the economy as a whole on each of the capital goods that a (“downstream”) industry purchases. Using R&D data from the National Science Foundation, I construct measures of capital-embodied R&D. I find they have a strong effect on conventionally measured total-factor productivity growth, a phenomenon that seems to be due partly to the mismeasurement of quality change in the capital stock and partly to a positive correlation between embodied and disembodied technological change. Finally, I find the cross-industry variation in empirical estimates of embodied technological change accord with the cross-industry variation in embodied R&D. Journal of Economic Literature Classification Number: O3.     

Well‐Being,Deprivation, and the Great Recession in the U.S.: A Study in A Multidimensional Framework

We study changes in social well‐being and deprivation in the U.S. during the Great Recession and the subsequent recovery. We outline an analytical framework for measuring well‐being and deprivation in a multidimensional fashion when data on achievement in each dimension is assumed to be ordinal and binary in nature. We use data from the American Community Survey between 2008 and 2015 and find that there was a decline in social well‐being and a rise in social deprivation in the U.S. during the recession followed by a reversal of trends during the recovery. Despite low deprivation levels among the White population, this population experienced the largest increase in deprivation during the recession and the least decline in deprivation in the recovery period. These results underscore the fact that the impact of recession and the subsequent recovery varied significantly across population groups.     

A COMPARATIVE ANALYSIS OF HOUSEHOLD WEALTH PATTERNS IN FRANCE AND THE UNITED STATES

We find that household wealth is distributed more unequally in the U.S. in 1983 than France in 1986. The Gini coefficient is 0.77 for the U.S. and 0.71 for France. There are also significant differences in the composition of wealth. Owner-occupied housing accounted for half of total assets in France, and only 30 percent in the U.S., while corporate stock and financial securities amounted to 19 percent in the U.S. and 8 percent in France. The debt-equity ratio was 0.13 in France and 0.20 in the U.S. The age-wealth profile in the two countries had the characteristic hump-shape predicted by the life-cycle model, but the profile was much flatter in France and peaked for families aged 50–59 in France, compared to 60–69 in the US.     

重庆市城市用地供需状况研究

首先从供给数量和供给质量两方面,分析了重庆市区城市建设用地的供给状况。耕地在重庆市城市建设用地的供给来源中占有重要地位,但供给数量有限;受重庆市区自然条件的限制,城市建设用地的质量较差,表现在坡地多、平地少,冲沟多、地块小,难建地多、宜建地少,所以,重庆市城市建设用地的供给能力相当有限。其次,分析了重庆市区城市建设用地的需求状况。从城市GDP的增长、重点建设项目和城市人均用地水平的提高这三个方面分析了城市建设用地的未来需求趋势。结论是：重庆城市建设用地的供给相当有限,而需求量很大;随着未来重庆市经济社会的发展,城市用地的供需矛盾将成为城市发展中面临的一个重大问题。从合理利用和保护土地资源,为重庆的经济发展提供用地支持和保障的角度出发,文章就此问题提出了对策和建议。     

The U-shape of happiness in Scotland

We examine well-being in Scotland using micro data from the Scottish Health Survey and the UK Annual Population Surveys. We find evidence of a midlife nadir or zenith in Scotland in well-being at around age 50 using a variety of measures of both happiness and unhappiness. We confirm that higher consumption of fruit and vegetables is associated with higher levels of happiness in Scotland. We compare this with evidence for England from the Health Survey of England. The decline in well-being between youth and midlife is comparable in size to the loss of a spouse or of a job and around half of the fall in well-being in the COVID-19 lockdown. We also find a midlife peak in suicides in Scotland. Despite higher mortality and suicide rates in Scotland than in England, paradoxically we find that the Scots are happier than the English. Northern Ireland is the happiest of the four home countries. We also find evidence of U-shapes in England, Wales and Northern Ireland in the mid to late forties.     

1990年代上海市人口和就业变化的空间格局和国际对比

文章将上海市划分为核心区、内圈、外圈三个部分，对其1990年代人口和就业结构的变化及其空间差异进行了分析并与若干东南亚特大城市进行了对比。研究表明，与这些东南亚特大城市相类似，上海市1990年代人口和就业增长最快的是其内圈。但与上述东南亚特大城市不同的是，上海市就业结构的变化仍以核心区最为突出；核心区仍保持较强的发展势头。研究还表明，1990年代上海经历了前所未有的人口和产业从核心区向外围的扩散。但与上述东南亚特大城市相比，这种扩散的空间范围有限，其郊区化和产业结构向高级服务业转变的过程仍处于起始阶段。上述分析和对比对研究上海今后人口分布和就业结构的演变和空间规划有着重要启示。     

科技投入超效率测度的偏DEA分析与资本驱动的区域协调

现有科技活动效率研究存在异质性缺陷，导致无法深入分析引发效率差异的区域演进成因。应用超效率测度理论结合偏DEA视窗法，实证分析2010—2019年全国内地30个省（市）科技活动效率的动态演化进程，并从科技资本投入视角构建面板数据方程，考察不同资本类型驱动下我国科技投入效率空间溢出的直接效应与间接效应，同时，应用Moran′sI指数衡量各省（市）科技活动效率与空间集聚关联性。研究表明：近十年来我国科技活动效率整体呈现快速上升—趋势减缓—明显下降的发展态势，其中，东北地区效率饱和，投资冗余明显；华北地区效率偏低，高效率省（市）带动能力突出；华东和中南地区效率呈螺旋式上升，区域内省（市）组团差异明显；西北地区与西南地区效率偏高，但省（市）分化差异明显。从整体看，我国科技活动效率溢出能力显著，政府资本与企业资本对总效率溢出呈正向影响；外来资本对总效率溢出无明显影响，且资本效应的空间关联性不显著，绝大多数省市的科技活动效率提升处于资本弥补阶段，极少省市处于资本驱动状态。     

Nonperforming Loans and Purchase of Loans by Public Asset Management Companies in Malaysia and Thailand

This paper explores the factors which eliminated the nonperforming loan (NPL) problem in Malaysia and Thailand following the 1997 Asian financial crisis. The number of NPL, which expanded in the aftermath of the crisis, has since declined in most South‐East Asian countries. Although previous studies have explored the causes of the increase in NPL numbers, few have analysed the factors that contributed to the reduction in their number in Asia. In Malaysia and Thailand, authorities put in place several measures to manage NPL. As a vehicle to acquire NPL from banks, Malaysia established the Pengurusan Danaharta Nasional Berhad (Danaharta) in 1998, while Thailand established the Thai Asset Management Corporation (TAMC) in 2001. We analyse whether the characteristic features of banks, improvements in macroeconomic conditions, and facilities for purchasing loans caused a reduction in the number of NPL in Malaysia and Thailand. The results suggest that selling loans to a public asset management company was effective in reducing the number of NPL in Thailand. While macroeconomic conditions influenced the decline in NPL ratios in Thailand, in Malaysia, well performing commercial banks and large commercial and investment banks generally had smaller NPL ratios throughout and following the crisis.     

The impact of FDI on host countries: the analysis of selected service industries in the Visegrad countries

Foreign direct investments are substantial in the services sector in the Visegrad countries. In this article, we analyse the impact of FDI on the host economy in four selected service industries in two areas: export and employment. FDI in the four selected service industries differ in terms of their vertical or horizontal nature: in business services FDI is predominantly vertical; in financial services and telecommunications it is predominantly horizontal; while in computer-related service activities both types can be found. According to our results, the impact on the host economy differs in the four service industries. We found a positive and significant impact on exports in vertical business services and in horizontal telecommunications services, and on employment in business services and, to a lesser extent, in financial services. The positive impact either diminished or disappeared during the global recession of 2008–2009. The comparison of the four Visegrad countries demonstrates the heterogeneous intensity and significance of this impact, indicating their different specialisations in the analysed services industries.     

WHY GROWTH RATES DIFFER—A SUMMARY AND APPRAISAL

This review article initially summarizes some of the highlights of the volume Why Growth Rates Differ , including the use of income shares as weights for the various factor inputs and some of the major factual conclusions drawn from the inter-country comparisons. Some of the main factors in differences in income levels and differences in growth rates are then reviewed.
In appraising the contribution of the volume, the monumental task is emphasized. This study illustrates the adaptability of the approach which Denison developed initially in The Sources of Economic Growth. The volume meets many of the questions and criticisms raised of his earlier study, and should encourage a shift of the discussion from methodology towards the substance of the empirical results.
The volume introduces some shifts in emphasis on the importance of different factors in growth. The role of demand variations and the contribution of capital is considered, but the evidence in the volume gives less emphasis on the importance of these factors than earlier work by others in both the United States and Europe. The volume gives some emphasis to shifts out of agriculture and the self-employed in the high postwar growth in many individual European countries. It considers the effects of reductions in trade barriers, and follows the view of most economists in playing this down. Advances in knowledge are also considered.
Those who are interested in questions of economic growth, past and future, and economic policy in this area will find much in this volume for study and reflection.