Reinsdorf discusses productivity and trade

Survey of Current Business, August, 2005

Since 1995, productivity growth in the United States appears to have accelerated. Many researchers have concluded that the primary cause has been accelerated productivity growth in the information technology (IT) sector, as evidenced by significant declines in the prices of IT goods.

In a recent study, BEA economist Marshall B. Reinsdorf and three coauthors investigated a new explanation for these IT price changes and, by implication, for the apparent acceleration in productivity: Gains in terms of trade, especially for IT products. Reinsdorf discussed this topic last month at the National Bureau of Economic Research's Conference on Income and Wealth.

The study suggests that while gains in terms of trade explain only a small portion of the productivity speedup, they are important to consider in the measurement of productivity.