7/19/2019

Why America could be growing faster than you think. Maybe much faster, thanks to Silicon Valley

"In our central estimate, we estimate that the pace of annual real GDP growth is understated by around 1.0pp of GDP, up from 0.5pp in 2005 and 0.3pp in 1995. While the results contrast with Moulton’s finding that mismeasurement has actually declined—to 0.47pp today in PCE terms vs. 0.95pp in 1996)—the results are not directly comparable. Central issues such as healthcare quality, software quality, smartphone services and free digital goods measurement, and profit-shifting are not explicitly addressed in Moulton’s analysis.

Our results also suggest that nearly half of the slowdown in measured productivity growth since the financial crisis can be explained by measurement issues. We caution that the uncertainty around our estimates is large, particularly that pertaining to free digital goods and healthcare consumer inflation."