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Predicting Medium-Term TFP Growth in the United States: Econometrics vs ‘Techno-Optimism’

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  • Nicholas Crafts
  • Terence C. Mills

Abstract

We analyse TFP growth in the US business sector using a basic unobserved component model where trend growth follows a random walk and the noise is a first order autoregression. This is fitted using a Kalman-filter methodology. We find that trend TFP growth has declined steadily from 1.5 to 1.0 per cent per year over the past 50 years. Nevertheless, recent trends are not a good guide to actual medium-term TFP growth. This exhibits substantial variations and is quite unpredictable. Techno-optimists should not give best to productivity pessimists simply because recent TFP growth has been weak.

Suggested Citation

  • Nicholas Crafts & Terence C. Mills, 2017. "Predicting Medium-Term TFP Growth in the United States: Econometrics vs ‘Techno-Optimism’," National Institute Economic Review, National Institute of Economic and Social Research, vol. 242(1), pages 60-67, November.
    • Handle: RePEc:sae:niesru:v:242:y:2017:i:1:p:r60-r67
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    Cited by:

    1. Nicholas Oulton, 2019. "The UK and Western Productivity Puzzle: Does Arthur Lewis Hold the Key?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 36, pages 110-141, Spring.
    2. Yingying Lu & Yixiao Zhou, 2021. "A review on the economics of artificial intelligence," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1045-1072, September.

    More about this item

    Keywords

    productivity slowdown; secular stagnation; TFP growth;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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