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The US Productivity Slowdown, the Baby Boom, and Management Quality

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  • James Feyrer

Abstract

This paper examines whether management changes caused by the entry of the baby boom into the workforce explain the US productivity slowdown in the 1970s and resurgence in the 1990s. Lucas (1978) suggests that the quality of managers plays a significant role in determining output. If there is heterogeneity across workers and management skill improves with experience, an influx of young workers will lower the overall quality of management and lower total factor productivity. Census data shows that the entry of the baby boom resulted in more managers being hired from the smaller, pre baby boom cohorts. These marginal managers were necessarily of lower quality. As the boomers aged and gained experience, this effect was reversed, increasing managerial quality and raising total factor productivity. Using the Lucas model as a framework, a calibrated model of managers, workers, and firms suggests that the management effects of the baby boom may explain roughly 20 percent of the observed productivity slowdown and resurgence.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15474.

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Date of creation: Nov 2009
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Handle: RePEc:nbr:nberwo:15474

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  1. Fischer, Stanley, 1988. "Symposium on the Slowdown in Productivity Growth," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 3-7, Fall.
  2. Stephen D. Oliner & Daniel E. Sichel, 2000. "The resurgence of growth in the late 1990s: is information technology the story?," Finance and Economics Discussion Series 2000-20, Board of Governors of the Federal Reserve System (U.S.).
  3. John Fernald & David Thipphavong & Bharat Trehan, 2007. "Will fast productivity growth persist?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue Apr 6.
  4. Martin Neil Baily, 1981. "Productivity and the Services of Capital and Labor," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 1-66.
  5. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality In The United States, 1913-1998," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 1-39, February.
  6. Kogel, Tomas, 2005. "Youth dependency and total factor productivity," Journal of Development Economics, Elsevier, vol. 76(1), pages 147-173, February.
  7. Michael Sarel, 1995. "Demographic Dynamics and the Empirics of Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 398-410, June.
  8. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December.
  9. David E. Bloom & David Canning & Jaypee Sevilla, 2001. "Economic Growth and the Demographic Transition," NBER Working Papers 8685, National Bureau of Economic Research, Inc.
  10. James Feyrer, 2007. "Demographics and Productivity," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 100-109, February.
  11. Weinberg, Bruce A., 2004. "Experience and Technology Adoption," IZA Discussion Papers 1051, Institute for the Study of Labor (IZA).
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