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Why has the Employment-Productivity Tradeoff among Industrialized Countries been so strong?

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  • Paul Beaudry
  • Fabrice Collard

Abstract

This paper is motivated by a set of cross-country observations on labor productivity growth among industrial countries over the period 1960-1997. In particular, we show that over this period, the speed of convergence among industrialized countries has decreased substantially while the negative effect of a country's own employment growth (or labor force growth) on labor productivity has increased dramatically. The main contribution of the paper is to show how these observations are consistent with the view that industrialized countries have been undergoing a particularly drastic technological revolution over the recent past. In effect, we show how the process of endogenous technological adoption, following the diffusion of a general purpose technology, can explain these observations by causing the emergence of an AK accumulation phase where demographic factors temporarily become an major determinant of labor productivity growth. Our estimation of the model implies that the AK phase has been in effect since the early to mid-seventies, but that this phase may now be coming to an end. An important contribution of the paper is to analyze growth experiences across advanced industrialized countries within an open economy framework and to evaluate the explanation by estimating a multicountry dynamic general model.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8754.

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Date of creation: Jan 2002
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Handle: RePEc:nbr:nberwo:8754

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  1. Susanto Basu & David N. Weil, 1996. "Appropriate Technology and Growth," NBER Working Papers 5865, National Bureau of Economic Research, Inc.
  2. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  3. Paul Beaudry & David Green, 2000. "The Changing Structure of Wages in the US and Germany: What Explains the Differences?," NBER Working Papers 7697, National Bureau of Economic Research, Inc.
  4. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
  5. Maurice Obstfeld and Kenneth Rogoff., 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," Center for International and Development Economics Research (CIDER) Working Papers C00-112, University of California at Berkeley.
  6. Trajtenberg, M. & Bresnahan, T.F., 1992. "General Purpose Technologies: "Engines of Growth"," Papers 16-92, Tel Aviv.
  7. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  8. 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.
  9. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
  10. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  11. Paul Beaudry & David Green, 1998. "What is Driving US and Canadian Wages: Exogenous Technical Change or Endogenous Choice of Technique?," NBER Working Papers 6853, National Bureau of Economic Research, Inc.
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  1. The Short-Run Costs of Labor market Liberalization
    by Mark Thoma in Economist's View on 2008-04-15 22:51:29
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