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Abstract

We use tests for multiple breaks at unknown points in the sample, and the Stock-Watson (1996, 1998) time-varying parameters median-unbiased estimation methodology, to investigate changes in the equilibrium rate of growth of labor productivity–both per hour and per worker–in the United States, the Eurozone Australia, and Japan over the post-WWII era. Results for the U.S. well capture the 'conventional wisdom’ of a golden era of high productivity growth, the 1950s and 1960s; a marked deceleration starting from the beginning of the 1970s; and a strong growth resurgence starting from mid-1990s. Interestingly, evidence suggests the 1990s’ productivity acceleration to have reached a plateau over the last few years. Results for the Eurozone point towards a marked deceleration since the beginning of the 1980s, with the equilibrium rate of growth of output per hour falling to 0.9% in 2004:4. Results based on Cochrane’s variance ratio estimator suggest a non-negligible fraction of the quarter-on-quarter change in labor productivity growth to be permanent. From a technical point of view, we propose a new method for constructing confidence intervals for variance ratio estimates based on spectral bootstrapping. Preliminary Monte Carlo evidence suggests such a method to possess good coverage properties.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 31 (2007)
Issue (Month): 8 (August)
Pages: 2847-2877

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Handle: RePEc:eee:dyncon:v:31:y:2007:i:8:p:2847-2877

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Find related papers by JEL classification:

• E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
• E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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Cited by:

1. Cliff L. F. Attfield & Jonathan R. W. Temple, 2006. "Balanced growth and the great ratios: new evidence for the US and UK," Centre for Growth and Business Cycle Research Discussion Paper Series 75, Economics, The Univeristy of Manchester.
   
   • Attfield, Cliff & Temple, Jonathan R.W., 2010. "Balanced growth and the great ratios: New evidence for the US and UK," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 937-956, December.
2. Luca Benati & Haroon Mumtaz, 2007. "U.S. evolving macroeconomic dynamics - a structural investigation," Working Paper Series 746, European Central Bank.
3. Peter McAdam & Alpo Willman, 2011. "Technology, utilization and inflation: what drives the New Keynesian Phillips Curve?," Working Paper Series 1369, European Central Bank.
   
   • Peter McAdam & Alpo Willman, 2012. "Technology, Utilization and Inflation: What Drives the New Keynesian Phillips Curve?," School of Economics Discussion Papers 0912, School of Economics, University of Surrey.
4. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada.
5. Benati, Luca & Goodhart, Charles, 2008. "Investigating time-variation in the marginal predictive power of the yield spread," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1236-1272, April.
   
   • Luca Benati & Charles Goodhart, 2007. "Investigating time-variation in the marginal predictive power of the yield spread," Working Paper Series 802, European Central Bank.
6. Juan F. Jimeno & Esther Moral & Lorena Saiz, 2006. "Structural breaks in labor productivity growth: the United States vs. the European Union," Banco de España Working Papers 0625, Banco de España.

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