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Will fast productivity growth persist?

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  • John Fernald
  • David Thipphavong
  • Bharat Trehan

Abstract

Strong productivity growth is essential for improving living standards and can have an important impact on economic policy, yet economists are far from being experts at predicting when the trend of productivity growth might shift. In the 1960s, productivity growth boomed, growing at an average annual rate of 2-1/2%. It weakened in the early 1970s, and for the next two decades or so averaged an annual growth rate of only about 1-1/4%. Then, in the mid-1990s, productivity growth boomed again, averaging about a 3% annual rate from the last quarter of 1995 through the middle of 2004. These shifts were not predicted and were generally not widely recognized until years after they occurred. Considering that, since the middle of 2004, productivity growth has averaged only about 1-1/2% per year, it may be time to ask whether this is just a "pause" in the boom that started in the mid-1990s or a shift back to the growth rates seen in the 1970s and 1980s. This Economic Letter begins to answer this question by focusing on the factors that underlay the most recent productivity boom and what they may portend for the future.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal FRBSF Economic Letter.

Volume (Year): (2007)
Issue (Month): apr6 ()
Pages:

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Handle: RePEc:fip:fedfel:y:2007:i:apr6:n:2007-09

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Keywords: Productivity;

References

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  1. Susanto Basu & John Fernald, 2006. "Information and communications technology as a general-purpose technology: evidence from U.S industry data," Working Paper Series, Federal Reserve Bank of San Francisco 2006-29, Federal Reserve Bank of San Francisco.
  2. David, P.A., 1989. "Computer And Dynamo: The Modern Productivity Paradox In A Not-Too Distant Mirror," The Warwick Economics Research Paper Series (TWERPS) 339, University of Warwick, Department of Economics.
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Cited by:
  1. John Fernald, 2014. "Productivity and Potential Output Before, During, and After the Great Recession," NBER Working Papers 20248, National Bureau of Economic Research, Inc.
  2. Janet L. Yellen, 2007. "The U.S. economy and monetary policy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue dec7.
  3. James Feyrer, 2011. "The US productivity slowdown, the baby boom, and management quality," Journal of Population Economics, Springer, Springer, vol. 24(1), pages 267-284, January.

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