Is Productivity Growth Too Strong For Our Own Good? (original) (raw)

A Retrospective Look at the U.S. Productivity Growth Resurgence

Journal of Economic Perspectives, 2008

It is now widely recognized that information technology (IT) was the key to the dramatic acceleration of U.S. labor productivity growth in the mid-1990s. This paper traces the evolution of productivity estimates to document how and when this perception emerged. Early studies concluded that IT was relatively unimportant. It was only after the massive IT investment boom of the late 1990s that this investment and closely related productivity increases in the ITproducing sectors were identified as important sources of growth. Although IT has diminished in significance since the dot-com crash of 2000, we project that private sector productivity growth will average around 2.5 percent per year for the next decade, only moderately below the average of the post-1995 period.

Revisiting U. S. Productivity Growth over the Past Century with a View of the Future

2010

This paper is dedicated not only to the 80th birthday of Angus Maddison but also to the memory of Robert McGuckin of the Conference Board. The 2006 conference version of this paper was made possible by the creative research assistance of Robert Krenn. Jesse Wiener brought new insights to this revision and extension of the data. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Prospects for a revival in U. S. productivity growth

Journal of Policy Modeling, 2019

The growth rate of total-economy U.S. labor productivity during the eight-year period between 2010:Q3 and 2018:Q3 was only 0.53 percent, lower by a large margin than any other eight-year interval in U.S. postwar quarterly data. This paper divides the question of a possible revival in productivity growth into two questions. The first is the possibility of a procyclical response in the gap between actual and trend productivity growth, and the second is a revival in the productivity growth trend itself. An econometric study of the procyclical gap response examines the sensitivity of that reaction to a higher output gap to alternative methods of detrending and to the choice between a level versus a change specification. We conclude that there was a statistically significant downward shift from a productivity gap response of about 0.25 to a one-percentage point change in the output gap prior to 1986 to a response that is insignificantly different from zero since 1986. That result is qualified by the fact that the decline in the procyclical response is heavily influenced by the countercyclical behavior of productivity growth during the year 2009. In some specifications there is still a procyclical response of as much as 0.2 in data for 1986-2007. The downward shift after 1985 in the response of the productivity gap implies an equal and opposite upward shift in the response of the hours gap to the output gap, and most of this emerges as a significant upward shift in the cyclical sensitivity of the employment rate. Our results contradict the recent finding of Laurence Ball and co-authors that in the context of Okun's Law the responsiveness of the unemployment rate to the output gap has been stable over the postwar period. Because there is no post-1985 procyclicality in the productivity gap, in simulations of our equation estimated through 2015 we find that projections of the coefficients accurately track the failure of productivity growth to exhibit any revival during the three quarters of 2018 during which output growth has accelerated. Lacking a procyclical revival of the productivity gap, the chance of a revival rests with the productivity growth trend itself. An equation that estimates the responsiveness of that trend to labor market tightness and to capital deepening yields our final conclusion that, based on forecasts of the future trajectory of the unemployment rate and the capital-labor ratio, a revival in trend productivity growth of 0.4 percentage points may occur during 2019-21.

Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income

Brookings Papers on Economic Activity

It's no secret that the gap between the rich and the poor has been growing, but the extent to which the richest are leaving everybody else behind is not widely known.. .. It's like chasing a speedboat with a rowboat.-Bob Herbert, The New York Times 1 There is no question that a huge gap has opened up between productivity and living standards.. .. Not since World War II have productivity and income diverged so sharply.-Louis Uchitelle, The New York Times 2 THE FIRST HALF of this decade has witnessed a sharp contrast between strong output and productivity growth, on the one hand, and slow employment and median income growth, on the other. The strong growth in output combined with weak growth in hours worked has resulted in an explosion 67

Projecting Productivity Growth: Lessons from the US Growth Resurgence

The New Economy and Beyond, 2006

This paper analyzes the sources of U.S. labor productivity growth in the post-1995 period and presents projections for both output and labor productivity growth for the next decade. Despite the recent downward revisions to U.S. GDP and software investment, we show that information technology (IT) played a substantial role in the U.S. productivity revival. We then outline a methodology for projecting trend output and productivity growth. Our base-case projection puts the rate of trend productivity growth at 2.21% per year over the next decade with a range of 1.33-2.92%, reflecting fundamental uncertainties about the rate of technological progress in IT-production and investment patterns. Our central projection is only slightly below the average growth rate of 2.36% during the 1995-2000 period.

Potential Growth of the US Economy: Will the Productivity Resurgence Continue

Business Economics, 2006

This paper analyzes the sources of U.S. productivity growth through 2004 and presents medium-term projections for the U.S. economy. We attribute a substantial portion of productivity gains over the past decade to production and use of information technology equipment and software. In the most recent years, we also identify a growing contribution from sources outside the technology- producing sectors. Our base-case projection for the GDP growth rate is almost exactly three percent. We emphasize the substantial range of uncertainty by presenting an optimistic projection of 3.5 percent and a pessimistic projection of only 1.9 percent.

Productivity and Performance of U.S. Economic Growth: 1948-2015

International Journal of Economics & Management Sciences, 2018

This paper raises basic questions about the performance of economic growth. The paper is only about the United States and views the future from 2015-2015 while pretending that the financial crisis did not happen. The sample period for investigation in 1945-2015 the empirical analysis of this study employed annual secondary data, collected from different sources, which are time series data. Growth gradually accelerated after 1750, reached a peak in the middle of the 20th century, and has been slowing down since. Three influential factors of growth are less the labor force, technology, and capital. Growth of technology is the most influential and thus special attention should be given its advancement. A key idea to take away from this paper is that while a model that fit the current data well, it may weigh recent events to heavily, recessionary or exponential growth, the average between the most optimistic and pessimistic models may be the best bet. Technology makes up the greatest fraction of total production and changes in labor and capital would not affect the growth rate as much as technology can and it was projected that in 20 years, the GDP level could be anywhere from 19,138.8usingthepolynomialmodelto19,138.8 using the polynomial model to 19,138.8usingthepolynomialmodelto34,681.8 using the first order exponential model. The growth rate of GDP is at 2.07% as of 2015, but using the first order exponential model, it will slow down to 1.38% by 2035. Keywords: Economic growth; Technology; Polynomial model; Productivity; Exponential model; Linear model

Exploding Productivity Growth: Context, Causes, and Implications

Brookings Papers on Economic Activity, 2003

Will potential output grow in the future at a 4 percent annual rate, as several of the more optimistic business economists assume, or at the pathetic 1.8 percent annual rate assumed into the distant future by the trustees of the Social Security Administration? 1 Put differently, will real GDP in seventy-five years be 20 times its current level or a mere 3 1 ⁄ 2 times? Academic research on future supply-side issues has focused mainly on the causes of the post-1995 productivity growth revival, but the growth rate of potential output is of independent interest. Variations in four factors-population growth, labor force participation, the unemployment rate, and hours worked per employee-can create significant differences between the long-run path of potential output and that of trend productivity growth. These differences matter for numerous issues,

Relative productivity growth and the secular “decline” of U.S. manufacturing

The Quarterly Review of Economics and Finance, 2010

There has been considerable debate about the causes of the "decline" of U.S. manufacturing over the post-war period. We show that the behavior of employment, prices and output in manufacturing relative to services over this period can be explained by a two-sector growth model in which productivity shocks are the only driving forces. The data also suggest that households are unwilling to substitute goods for services (the estimated elasticity of substitution is statistically indistinguishable from zero), so the economy adjusts to differential productivity growth entirely by re-allocating labor across sectors.

The slowdown in US productivity growth - what explains it and will it persist?

2016

The US recovery following the Great Recession has been marked by persistent low growth. At the same time, productivity growth has consistently disappointed in the aftermath of the last recession. This has raised doubts about the long-term growth prospects of the US economy and led to worries about secular stagnation. This paper contributes to the debate by empirically revising the main determinants of labour productivity growth over the period 1999-2013 for a panel of US states, focusing on capital deepening, R&D spending, the sectoral composition, financial factors and business dynamism. We find that more than half of the slowdown in productivity growth in the period 2011-13 relative to its sample average is due to a decline in the rate of capital deepening. The other major factor explaining the recent weakness in productivity growth - more closely related to TFP - is the slowdown in business dynamism experienced by the US economy. By contrast, financial factors appear to have beco...