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What Explains the Post-2004 U.S. Productivity Slowdown?

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  • Alexander Murray

Abstract

Economic theory and history show that labour productivity growth is the main driver of rising living standards, so changes in the trend rate of productivity growth have profound implications for a society's future prosperity. The average annual rate of business sector labour productivity growth in the United States declined by 1.9 percentage points between the 1995-2004 period and the 2004-2015 period, from 3.2 per cent to 1.3 per cent. This article summarizes the state of knowledge on the causes of the post-2004 slowdown in U.S. productivity growth. Official growth accounting estimates indicate that 60-65 per cent of the labour productivity decline is accounted for by a decline in total factor productivity growth, while 30-35 per cent is accounted for by a decline in the rate of capital deepening. Three industries account for over 80 per cent of the aggregate labour productivity decline: manufacturing, wholesale trade, and retail trade. The aggregate productivity slowdown is traceable to a decline in the productivity contributions arising from industries that produce or intensively use information and communication technology (ICT) products.

Suggested Citation

  • Alexander Murray, 2018. "What Explains the Post-2004 U.S. Productivity Slowdown?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 34, pages 81-109, Spring.
    • Handle: RePEc:sls:ipmsls:v:34:y:2018:5
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    References listed on IDEAS

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    1. Dave Byrne & Carol Corrado, 2017. "ICT Prices and ICT Services: What Do They Tell Us About Productivity and Technology," International Productivity Monitor, Centre for the Study of Living Standards, vol. 33, pages 150-181, Fall.
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    Cited by:

    1. Thomas Ziesemer, 2023. "Labour-augmenting technical change data for alternative elasticities of substitution: growth, slowdown, and distribution dynamics," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 32(4), pages 449-475, May.
    2. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    3. V. N. Minat, 2024. "Impact of structural shifts on labor productivity dynamics as a factor of regionalization and metropolization of the US economy," Russian Journal of Social Sciences and Humanities, Omsk Humanitarian Academy, vol. 18(1), pages 212-229, March.
    4. Wulong Gu & Michael Willox, 2018. "Productivity Growth in Canada and the United States: Recent Industry Trends and Potential Explanations," International Productivity Monitor, Centre for the Study of Living Standards, vol. 35, pages 73-94, Fall.

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    Keywords

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    JEL classification:

    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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