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Measuring Productivity Growth over the 90s:Is the New Economy Still Alive?*1

April 2003
Ryo Kato*2
Hironori Ishizaki*3

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This paper presents an updated estimation of the total factor productivity (TFP) of the U.S. economy following the two preceding empirical studies, Basu et al. (2001) and Burnside et al. (1995). Based on these two estimation approaches, both of which carefully handle the potential estimation bias stemming from cyclical utilization, we verified that the TFP growth in the late 90s was, to some extent, higher than that in the 80s. Further, our estimation results support the following views; (i) the effect of the higher growth of TFP on the level of output was permanent, however, (ii) the acceleration of growth rate of output was transitory in the sense that the TFP growth rates after 1999 turn out to be nearly the same as those in the 80s and early 90s.

Key Words:
TFP, New Economy, capital utilization

JEL Classification:
E23, E32

  • *1 We thank Kazuhiko Ishida, Katsuhito Saitoh, Takuji Kawamoto at University of Michigan, Takayuki Tsuruga at the Ohio State University, and our colleagues at the Bank of Japan for comments and helpful discussion. All errors remain our own. The views expressed in the paper are solely of the authors, and not those of the Bank of Japan.
  • *2 Corresponding author. 2-1-1 Nihonbashi Hongoku-cho, Chuo-ku, Tokyo 103-8660. Tel.: 81-3-3279-1111. Fax: 81-3-5255-7455. E-mail: (
  • *3 E-mail: