The Productivity Slowdown in Advanced Economies: Common Shocks or Common Trends?

John Fernald, Robert Inklaar*, Dimitrije Ruzic

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

3 Citations (Scopus)
122 Downloads (Pure)

Abstract

This paper reviews advanced-economy productivity developments in recent decades. We focus primarily on the facts about, and explanations for, the mid-2000s labor-productivity slowdown in large European countries and the United States. Slower total factor productivity (TFP) growth was the proximate cause of the slowdown. This conclusion is robust to measurement challenges including the role of intangible assets, rankings of productivity levels, and data revisions. We contrast two main narratives for the stagnating TFP frontier: The shock of the Global Financial Crisis; and a common slowdown in TFP trends. Distinguishing these two empirically is hard, but the pre-recession timing of the U.S. slowdown suggests an important role for the common-trend explanation. We also discuss the unusual pattern of labor productivity growth since the start of the Covid-19 pandemic. Although it is early, there is little evidence so far that the large pandemic shock has changed the slow pre-pandemic trajectory of labor-productivity growth.
Original languageEnglish
Article numbere12690
Number of pages36
JournalReview of Income and Wealth
Volume71
Issue number1
Early online date23-Apr-2024
DOIs
Publication statusPublished - Feb-2025

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