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Projecting productivity growth: lessons from the U.S. growth resurgence

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  • Mun S. Ho
  • Dale W. Jorgenson
  • Kevin J. Stiroh

Abstract

Following the 1995-2000 period of more rapid output growth and lower inflation in the United States, economists have strenuously debated whether improvements in economic performance can be sustained. The recession that began in March 2001 intensified the debate, and the economic impacts of the events of September 11 have yet to be fully understood. Both factors add to the considerable uncertainties about future growth that currently face decision makers in both the public and private sectors. ; In this article, the authors analyze the sources of U.S. labor productivity growth in the post-1995 period and present projections for both output and labor productivity growth for the next decade. Despite the 2001 downward revisions to U.S. gross domestic product and software investment, the authors show that information technology (IT) played a substantial role in the U.S. productivity revival. The article then outlines a methodology for projecting trend output and productivity growth. The base-case projection puts the rate of trend productivity growth at 2.21 percent per year over the next decade with a range of 1.33 to 2.92 percent, reflecting fundamental uncertainties about the rate of technological progress in IT-production and investment patterns. The central projection is only slightly below the average growth rate of 2.36 percent during the 1995-2000 period.

Suggested Citation

  • Mun S. Ho & Dale W. Jorgenson & Kevin J. Stiroh, 2002. "Projecting productivity growth: lessons from the U.S. growth resurgence," Economic Review, Federal Reserve Bank of Atlanta, vol. 87(Q3), pages 1-13.
    • Handle: RePEc:fip:fedaer:y:2002:i:q3:p:1-13:n:v.87no.3
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    References listed on IDEAS

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    1. Martin N. Baily, 2001. "Macroeconomic implications of the new economy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 201-268.
    2. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
    3. Martin Neil Baily, 2001. "Macroeconomic Implications of the New Economy," Working Paper Series WP01-9, Peterson Institute for International Economics.
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    6. Bart Hobijn, 2001. "Is equipment price deflation a statistical artifact?," Staff Reports 139, Federal Reserve Bank of New York.
    7. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
    8. Ana M. Aizcorbe, 2002. "Why are semiconductor prices falling so fast? Industry estimates and implications for productivity measurement," Finance and Economics Discussion Series 2002-20, Board of Governors of the Federal Reserve System (U.S.).
    9. Mark W. French, 2001. "Estimating changes in trend growth of total factor productivity: Kalman and H-P filters versus a Markov-switching framework," Finance and Economics Discussion Series 2001-44, Board of Governors of the Federal Reserve System (U.S.).
    10. Roberts John M., 2001. "Estimates of the Productivity Trend Using Time-Varying Parameter Techniques," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-32, July.
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    More about this item

    Keywords

    Productivity; Technology; Economic development;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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