Summary of Methods
Summary of Methods The methodology for preliminary estimates is discussed in “Preliminary estimates of multifactor productivity growth” located at http://www.bls.gov/opub/mlr/2005/06/art3abs.htm. This release uses a methodology for preliminary estimates that uses data that are available shortly after the end of the calendar year. The methodology is a simplified version of the full methodology that BLS uses when more detailed information is available. Preliminary estimates for the private nonfarm business sector are produced using the same methodology as that used for the production of estimates for the private business sector; the only difference is that the farm sector is excluded. Capital Input: Capital input measures the services derived from the stock of physical assets and software. The assets included are computers, software, communications and other information processing equipment, other fixed business equipment, structures, inventories, rental residences, and land. Investments, depreciation, capital income, and rental prices are estimated for each of these eight aggregates. Rental prices reflect the nominal rates of return and rates of economic depreciation and revaluation for the specific asset. Rental prices are adjusted for the effects of taxes. Data on investments in physical assets are obtained from BEA. Capital input measures constructed for the preliminary MFP measures are based on less detail than those for full MFP measure. Labor Input: Labor input is total hours worked multiplied by a labor composition index. Hours paid of employees are largely obtained from BLS’s Current Employment Survey (CES). These hours of employees are then converted to an at-work basis by using information from the Employment Cost Index (ECI) of the National Compensation Survey (NCS) and the Hours at Work Survey. Hours at work for non-production and supervisory workers are derived using data from the CPS, the CES, and the NCS. The hours at work of proprietors, unpaid family workers, and farm employees are derived from the Current Population Survey. The labor composition index estimates the effect of shifts in the experience, education, and gender composition of the work force on the efficiency of labor and multifactor productivity growth. The preliminary MFP labor composition measure estimates the number of hours worked by each type of worker based on CPS data. The estimate of the 2007 labor composition index assumed that relative wages across groups remained constant between 2006 and 2007. The sum over all groups of the hour’s growth rates multiplied by the labor cost shares gives the growth in adjusted labor input. Subtracting this from the growth in total (un-weighted) hours yields the growth in labor composition. Additional information concerning data sources and methods of measuring labor composition can be found in BLS Bulletin 2426 (December 1993), "Labor Composition and U.S. Productivity Growth, 1948-90." http://www.bls.gov/mfp/home.htm Combined Inputs: Labor and capital input are combined using a Tornqvist index. Growth rates of labor and capital input are combined with weights that represent each component's share of total costs. Total costs are defined as the value of output (Gross Product Originating) less a portion of taxes on production and imports. Most taxes on production and imports, such as excise taxes, are excluded from costs; however, property and motor vehicle taxes remain in total costs. The index uses changing weights: The share in each year is averaged with the preceding year's share. Output: This release presents data for the U.S. private business sector. The private business sector, which accounted for approximately 77 percent of gross domestic product in 2000, includes all of gross domestic product except the output of general government, government enterprises, non-profit institutions, the rental value of owner-occupied real estate, and the output of paid employees of private households. Multifactor productivity measures exclude government enterprises, while the BLS quarterly Productivity and Cost series include them. Multifactor Productivity: The multifactor productivity indexes for private business and private nonfarm business are derived by dividing an output index by an index of labor input and capital services. The output indexes are computed as chained superlative indexes (Fisher Ideal indexes) of components of real output. BLS adjusts BEA output measures to remove the output of government enterprises.
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Last Modified Date: May 06, 2008