What do productivity indices tell us? A case study of U.S. industries

Abstract

We use fractional integration as a more general approach in order to examine productivity in U.S. manufacturing firms. We find that contrary to the standard analysis based on time trends with I(0) errors, many manufacturing U.S. industries are highly productive with positive productivity shocks causing permanent effects in the series. This implies that for recovery, policy interventions are necessary in these industries in the event of negative shocks.