Draft:Pete Klenow

Klenow received his PhD from Stanford in 1991 with a dissertation on "Externalities and Business Cycles."{{cite web |title= Peter Joseph Klenow |website=Mathematics Genealogy Project |url=https://mathgenealogy.org/id.php?id=232159 |access-date=10 March 2025}}{{cite journal |title=Doctoral Dissertations in Economics Eighty-ninth Annual List |journal=Journal of Economic Literature |year=1992 |volume=30 |issue=4 |pages=2514–2543 |jstor=2728058 |url=https://www.jstor.org/stable/2728058 |access-date=6 March 2025}} He was advised by Robert Hall and Kenneth L. Judd.

Klenow was a junior professor in the Chicago Booth School of Business from 1991 until 2000. He then joined the Federal Reserve Bank of Minneapolis as a senior economist.{{cite web |last=Pethokoukis |first=James |title=How Will America's Economy Grow in the 2020s? My Long-read Q&A with Peter Klenow |website=AEIdeas |url=https://www.aei.org/technology-and-innovation/how-will-americas-economy-grow-in-the-2020s-a-long-read-qa-with-peter-klenow/ |access-date=6 March 2025}}{{cite web |title= Peter J. Klenow |website=Federal Reserve Bank of Minneapolis |url=https://www.minneapolisfed.org/people/peter-j-klenow |access-date=6 March 2025}} In 2003, he returned to Stanford to join the faculty.

Beginning in 2025, Klenow will be a co-editor of Econometrica.{{cite web |title=Announcing the new 2025 co-editors |date=9 September 2024 |website=The Econometric Society |url=https://www.econometricsociety.org/society/news/Announcing-the-new-2025-co-editors-2024-09-10.html |access-date=6 March 2025}} From 2017 to 2023, he was a founding co-editor of AER:Insights.{{cite journal |title=Minutes of the Annual Business Meeting |year=2020 |journal=AEA Papers and Proceedings 2020 |publisher=American Economic Association |volume=110 |page=627 |url=https://www.aeaweb.org/conference/2021/aeabusinessmeeting?display |access-date=5 March 2025}}

Much of Klenow's work has focused on improving our measurements of macroeconomic variables. With Mark Bils, a frequent coauthor, Klenow wrote several papers on measuring the quality of goods and human capital, and its implication for growth models.{{cite journal |last1=Bils |first1=Mark |last2=Klenow |first2=Peter J |year=2000 |title=Does Schooling Cause Growth? |journal= American Economic Review |volume=90 |issue=5 |pages=1160–1183 |doi=10.1257/aer.90.5.1160 |url=http://klenow.com/BKHK.pdf}} They proposed using the increase in the willingness-to-pay of consumers as a fraction of their income to test how good quality changes as one’s income increases. Automobiles have a steep curve, suggesting that quality rises sharply, while the flat curve of vacuum cleaners suggests that the same technology is available to everyone.{{cite journal |last1=Bils |first1=Mark |last2=Klenow |first2=Peter J |date=2001 |title=Quantifying Quality Growth |journal=American Economic Review |volume=91 |issue=4 |pages=1006–1030 |doi=10.1257/aer.91.4.1006|url=http://papers.nber.org/papers/w7695.pdf }}

Economists have long observed that gross domestic product (GDP), the most commonly used measure of national welfare, does not capture many dimensions of social welfare like leisure and household production.{{cite web |last=Bunker |first=Nick |title= Looking beyond GDP when measuring welfare |website=Washington Center for Equitable Growth |url=https://equitablegrowth.org/looking-beyond-gdp-when-measuring-welfare/ |date=1 September 2016 |access-date=19 March 2016}}{{cite journal |last=Jorgensen |first=Dale W. |title=Production and Welfare: Progress in Economic Measurement |journal=Journal of Economic Literature |year=2019 |volume=56 |issue=3 |pages=867–919 |doi=10.1257/jel.20171358}} With Chad Jones, Klenow has proposed methods to capture health, consumption, leisure, and inequality in welfare measures.{{cite journal |last1=Jones |first1=Charles I |last2=Klenow |first2=Peter J |title= Beyond GDP? Welfare across Countries and Time |journal=American Economic Review |date=2016 |volume=106 |issue=9 |pages=2426–2457 |doi=10.1257/aer.20110236 |url=http://klenow.com/Jones_Klenow.pdf}}{{cite web | url=https://siepr.stanford.edu/news/measuring-economic-strength-quality-life | title=Measuring economic strength with quality of life |website=Stanford Institute for Economic Policy Research (SIEPR) | date=7 January 2016 |access-date=5 March 2025}} Adding these items to welfare statistics causes living standards in France and Germany to look more similar to those of the United States.{{cite news |last=Whitehouse |first=Mark |title=Nations Seek Success Beyond GDP |newspaper=Wall Street Journal |date=10 January 2011 |url=https://www.wsj.com/articles/SB10001424052748704064504576070343252409876 |access-date=5 March 2025}}{{cite news |title=Beyond GDP |date=20 September 2010 |newspaper=The Economist |url=https://www.economist.com/news/2010/09/20/beyond-gdp |access-date=5 March 2025}}

Klenow has proposed that we compare welfare across countries as a function of the number of people consuming, not just consumption per person.{{cite website |last=Cowen |first=Tyler |title=Population and Welfare: The Greatest Good for the Greatest Number |date=19 May 2023 |website=Marginal Revolution |url=https://marginalrevolution.com/marginalrevolution/2023/05/population-and-welfare-the-greatest-good-for-the-greatest-number.html |access-date=19 March 2025}} Using this approach, welfare has risen considerably in countries with high fertility rates like Mexico, while countries with low population growth like Japan have stagnated.{{cite journal |last1= Adhami |first1= Mohamad |last2= Bils |first2=Mark |last3=Jones |first3=Charles I |last4=Klenow |first4=Peter |title=Population and Welfare: Measuring Growth when Life is Worth Living |doi=10.3386/w31999 |year=2023 |journal=National Bureau of Economic Research Working Papers}}

Klenow has worked to improve measures of total factor productivity. His paper with Philippe Aghion, Antonin Bergeaud, Timo Boppart, and Huiyu Li corrects a bias in how statistical bureaus adjust for new product varieties.{{cite journal |last1=Aghion |first1=Philippe |first2=Antonin |last2=Bergeaud |first3=Timo |last3=Boppart |first4=Peter J |last4=Klenow |first5=Huiyu |last5=Li |year=2019 |title=Missing Growth from Creative Destruction |journal=American Economic Review |volume=109 |issue=8 |pages=2795–2822 |doi=10.1257/aer.20171745 |url=http://www.klenow.com/missing-growth.pdf |access-date=6 March 2025}} If a new product appears which surpasses a previously existing product so completely the old product is no longer sold, its quality adjusted price is necessarily below the old one. Statistical bureaus have no basis for saying how much lower it is, and presume that its price growth is the same as similar products which did not disappear entirely. They found that growth between 1983 and 2005 was substantially higher per year than otherwise believed.

With co-author Austin Goolsbee, Klenow developed the Adobe Digital Price Index, a comprehensive measure of online inflation.{{Cite web |last=Adobe Inc. |title=Adobe Digital Price Index |url=https://business.adobe.com/resources/digital-price-index.html |access-date=3 March 2024 |website=Adobe Digital Price Index}}

Klenow's 2009 paper with Chang-Tai Hsieh, “Misallocation and Manufacturing TFP in China and India,” has been cited more than 7,000 times as of March 2025.{{cite web |title=Google Scholar citation information for 'Misallocation and manufacturing TFP in China and India' |website=Google Scholar |url=https://scholar.google.com/scholar?cites=1674282926446689601 |access-date=10 March 2025}} More productive firms should have a larger share of the market, but they are often prevented by corruption or unfair regulations. To estimate this effect, the paper describes a tractable way to measure how far off the distribution of firms is from optimal.{{cite journal |last1=Hsieh |first1=Chang-Tai |last2=Klenow |first2=Peter J |title=Misallocation and Manufacturing TFP in China and India |journal=The Quarterly Journal of Economics |volume=124 |issue=4 |date=November 2009 |pages=1403–1448 |doi=10.1162/qjec.2009.124.4.1403 |url=http://klenow.com/MMTFP.pdf}} Revenue productivity – the amount of revenue brought in per unit of input – should be equal across all firms. These distortions are large in China and India than the US; if brought to the same level the US, they find that total factor productivity would rise 30-50% in China and 40-60% in India.{{Cite journal |last=Syverson |first=Chad |date=2011-06-01 |title=What Determines Productivity? |url=https://pubs.aeaweb.org/doi/10.1257/jel.49.2.326 |journal=Journal of Economic Literature |language=en |volume=49 |issue=2 |pages=326–365 |doi=10.1257/jel.49.2.326 |issn=0022-0515}}

In a later paper, Hsieh and Klenow (2014) propose reasons that country-level productivity diminishes when older firms cannot expand their most productive plants. In Mexico, moving production factors to the most-productive plants would double manufacturing productivity.{{cite journal |last=Hanson |first=Gordon |author-link=Gordon Hanson |title=Why Isn't Mexico Rich? |journal=Journal of Economic Literature |date=2010 |volume=48 |issue=4 |pages=987–1004 |doi=10.1257/jel.48.4.987}}

Efforts to measure factor misallocation are sensitive to the measurement practices of national statistical bureaus. For example, India does not clean its firm data.{{cite web |last1=Kim |first1=Hang |first2=Martin |last2=Rotemberg |first3=T. Kirk |last3=White |year=2021 |title=Plant-to-Table(s and Figures): Processed Manufacturing Data and Measured Misallocation |url=https://bpb-us-e1.wpmucdn.com/wp.nyu.edu/dist/a/8049/files/2021/07/RW_plant_to_table_July_2021.pdf?bid=8049 |access-date=13 March 2025}} A firm omitting a zero in their revenue would likely be caught in the US, but not in India. Klenow's 2021 paper with Mark Bils and Cian Rian proposes a correction which revises down the degree of misallocation in the developing world.{{cite journal |last1=Bils |first1=Mark |last2=Klenow |first2=Peter J |last3=Ruane |first3=Cian |title=Misallocation or Mismeasurement? |journal=Journal of Monetary Economics |volume=124 |year=2021 |pages=S39–S56 |doi=10.1016/j.jmoneco.2021.09.004|url=http://www.nber.org/papers/w26711.pdf }} Shocks to productivity should change its revenue and inputs in the same proportion is if it correctly measured, and will be disproportionate if a firm is systematically misreporting its true values.

Klenow's factor misallocation papers were cited as exemplary research in his induction to The Econometric Society.{{cite journal |title=2014 Election of Fellows to the Econometric Society |journal=Econometrica |volume=83 |issue=3 |date=May 2015 |pages=1255–1260 |url=https://onlinelibrary.wiley.com/doi/epdf/10.3982/ECTA833EF |doi=10.3982/ECTA833EF}} Alex Tabarrok has described Hsieh and Klenow's first factor misallocation paper as “pioneering”.{{cite web |last=Tabarrok |first=Alex |date=26 March 2015 |title=The Misallocation of Water |website=Marginal Revolution |url= https://marginalrevolution.com/marginalrevolution/2015/03/the-misallocation-of-water.html |access-date=5 March 2025}}

In addition, Klenow’s work has shed light on the harmful effects of discrimination on the allocation of talent. Hsieh, Hurst, Jones, and Klenow (2019) quantified the gains from allowing people to work the jobs which they are most suited for.{{cite journal |last1=Hsieh |first1=Chang-Tai |last2=Hurst |first2=Erik |last3=Jones |first3=Charles I. |last4=Klenow |first4=Peter J. |title=The Allocation of Talent and U.S. Economic Growth|journal=Econometrica |volume=87 |issue=5 |date=September 2019 |pages=1439–1474 |doi=10.3982/ECTA11427|url=http://www.nber.org/papers/w18693.pdf }} In an era of anti-black discrimination, or of workplace sexism, fully capable people were kept from achieving their full potential. The effects were large: they estimate that the reduction of labor force discrimination is responsible for between 20 and 40 percent of per person income growth in the United States between 1960 and 2010.{{cite news |last1=Andrade |first1=Eduardo |last2=Canuto |first2=Otaviano |title=Demographic Dynamics and Immigration Policies in High-Income Countries |date=4 April 2024 |website=Policy Center for the New South |url=https://www.thestreet.com/economonitor/news/demographic-dynamics-and-immigration-policies-hic |access-date=5 March 2025}}

When first released, the working paper received coverage on the blog Marginal Revolution.{{cite web|last=Tabarrok |first=Alex |title=The Growth of Justice |url= https://marginalrevolution.com/marginalrevolution/2012/05/the-growth-of-justice.html |date=9 May 2012 |access-date=5 March 2025}}{{cite web |last=Cowen |first=Tyler |title=The economic gains from a better allocation of talent |website=Marginal Revolution |url=https://marginalrevolution.com/marginalrevolution/2013/11/the-economic-gains-from-a-better-allocation-of-talent.html |date=27 November 2013 |access-date=5 March 2025}} U.S. Treasury officials have cited the paper to show that labor market discrimination limits economic growth.{{cite web |last1=Bowdler |first1=Janis |last2=Harris |first2=Benjamin |title=Racial Differences in Educational Experiences and Attainment |website=U.S. Department of the Treasury |url=https://home.treasury.gov/news/featured-stories/post-5-racial-differences-in-educational-experiences-and-attainment |date=9 June 2023 |access-date=5 March 2025}} Marianne Bertrand has profiled the work as an example of economists valuing the adverse effects of inequality, not only inefficiency, as a problem for economic growth.{{cite magazine |last=Bertrand |first=Marianne |title=In Praise of 'Messy Economics' |date=26 June 2018 |magazine=Chicago Booth Review |url=https://www.chicagobooth.edu/review/praise-messy-economics |access-date=5 March 2025}} Others have argued the paper's approach does not readily explain the persistence of racism, since it implies self-imposed economic harm. Sandy Darity argues racism can be better explained as a dominant racial group increasing its share of national income by excluding a nondominant racial group.{{cite journal |last=Darity |first=William A., Jr. |title=Position and Possessions: Stratification Economics and Intergroup Inequality |journal=Journal of Economic Literature |volume=60 |issue=3 |date=2002 |pages=400–426 |doi=10.1257/jel.20211690}}

Klenow’s career began with a series of papers about "learning by doing" in the semiconductor industry with Doug Irwin, which he extended in a general look at learning curves in manufacturing in 1998.{{cite journal |last1=Irwin |first1=Douglas A. |last2=Klenow |first2=Peter J. |title=High-tech R&D Subsidies: Estimating the Effects of Sematech |journal=Journal of International Economics |volume=40 |year=1996 |issue=3–4 |pages=323–344 |doi=10.1016/0022-1996(95)01408-X |url=http://klenow.com/JIESematech.pdf}} {{cite journal |last1=Irwin |first1=Douglas A. |last2=Klenow |first2=Peter J. |title=Learning-by-Doing Spillovers in the Semiconductor Industry |journal=Journal of Political Economy |volume=102 |issue=6 |year=1994 |pages=1200–1227 |doi=10.1086/261968 |url= http://klenow.com/LBD_Spillovers.pdf}}{{cite journal |last=Klenow |first=Pete |title=Learning Curves and the Cyclical Behavior of Manufacturing Industries |journal=Review of Economic Dynamics |year=1998 |volume=1 |issue=2 |pages=531–550 |doi=10.1006/redy.1998.0014 |url=http://klenow.com/REDLC.pdf}} They found that, while there were significant economies of scale in creating particular designs of computer chips, these did not extend from design to design. Economies of scale were contained largely within the firm, with some spillovers internationally, but did not stay within the country. Their results imply that the conditions for tariffs to improve outcomes are not met.

Klenow is a member of the:

• Econometric Society (2014){{cite web |title=Fellows of the Econometric Society |website=The Econometric Society |url=https://www.econometricsociety.org/society/organization-and-governance/fellows/current |access-date=5 March 2025}}
• American Academy of Arts and Sciences (2015){{cite web |title=Peter J. Klenow |website=American Academy of Arts & Sciences |date=February 2025 |url=https://www.amacad.org/person/peter-j-klenow |access-date=5 March 2025}}{{cite news |last=Parker |first=Clifton B. |title=American Academy of Arts and Sciences elects 10 Stanford professors to 2015 class |newspaper=Stanford Report |date=22 April 2015 |url=https://news.stanford.edu/stories/2015/04/aaas-members-new-042215 |access-date=6 March 2025}}

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