Can depleting technological opportunities explain the stagnation of productivity? Panel data evidence for 11 OECD countries

We analyze the stagnating productivity levels observable across many Western economies during the last two decades. Relying on techniques to measure total factor productivities (TFP), we provide evidence for a set of 11 OECD countries observed over the period from 1993-2011 that TFP-levels exhibited growth rates of about 0.9% per year until 2000. In the period after 2000, the TFP levels almost stagnated with average annual growth rates declining to about 0.3%. The stagnating trends hold almost uniformly across the analyzed countries and across broad economic sectors. Following recently made claims in the literature, we analyze the hypothesis that the stagnating trend was due to generally declining technological opportunities. Our evidence suggests that the importance of intrasectoral innovation as measured by R&D remained relatively constant and was at best slightly decreasing. However, the importance of investments in the physical capital stock considerably declined after 2000. We take this as evidence that rather than a general depletion of technological opportunities, the possibilities to achieve TFP-growth via capital-embodied technical change became less abundant.