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The Sources of the Productivity Rebound and the Manufacturing Employment Puzzle

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  • William Nordhaus

Abstract

Productivity has rebounded in the last decade while manufacturing employment has declined sharply. The present study uses data on industrial output and employment to examine the sources of these trends. It finds that the productivity rebound since 1995 has been widespread, with approximately two-fifths of the productivity rebound occurring in New Economy industries. Moreover, after suffering a slowdown in the 1970s, productivity growth since 1995 has been at the rapid pace of the earlier 1948-73 period. Finally, the study investigates the relationship between employment and productivity growth. If finds that the relevant elasticities indicate that more rapid productivity growth leads to increased rather than decreased employment in manufacturing. The results here suggest that productivity is not to be feared - at least not in manufacturing, where the largest recent employment declines have occurred. This shows up most sharply for the most recent period, since 1998. Overall, higher productivity has led to lower prices, expanding demand, and to higher employment, but the partial effects of rapid domestic productivity growth have been more than offset by more rapid productivity growth and price declines from foreign competitors.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11354.

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Date of creation: May 2005
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Handle: RePEc:nbr:nberwo:11354

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Cited by:
  1. Hoon Hian Teck & Edmund S. Phelps, 2006. "ICT-Producing Sector on Business Activity," Working Papers, Singapore Management University, School of Economics 07-2006, Singapore Management University, School of Economics.
  2. Robert C. Feenstra & Benjamin R. Mandel & Marshall B. Reinsdorf & Matthew J. Slaughter, 2009. "Effects of Terms of Trade Gains and Tariff Changes on the Measurement of U.S. Productivity Growth," NBER Working Papers 15592, National Bureau of Economic Research, Inc.
  3. Josheski, Dushko, 2014. "Keynesian macroeconomics without the LM curve: IS-MP-IA model and Taylor rule applied to some CESEE economies," EconStor Preprints 92955, ZBW - German National Library of Economics.
  4. Hian Teck Hoon & Edmund S. Phelps, 2006. "Effects of Technological Improvement in the Ict-Producing Sector on Business Activity," Discussion Papers, Columbia University, Department of Economics 0506-21, Columbia University, Department of Economics.
  5. Robert Z. Lawrence & Lawrence Edwards, 2013. "US Employment Deindustrialization: Insights from History and the International Experience," Policy Briefs PB13-27, Peterson Institute for International Economics.
  6. Lone Engbo Christiansen, 2008. "Do Technology Shocks Lead to Productivity Slowdowns? Evidence From Patent Data," IMF Working Papers 08/24, International Monetary Fund.
  7. Nitin Gupta, 2011. "The Differential Effects of Financial Development on India's Industrial Performance," ASARC Working Papers, The Australian National University, Australia South Asia Research Centre 2011-12, The Australian National University, Australia South Asia Research Centre.
  8. Francesco VENTURINI, 2006. "The Long-Run Impact of ICT," Working Papers, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali 254, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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