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Low Productivity Growth: The Capital Formation Link

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  • Richard Peach
  • Charles Steindel

Abstract

A major economic concern is the ongoing sluggishness in the growth of output per worker hour, generally called labor productivity. In an arithmetic sense, the growth of the economy can be accounted for by the increase in hours worked plus that of labor productivity. With the unemployment rate now at a level widely regarded as near ?full employment,? growth in hours worked is likely to be limited by demographic forces, most importantly the very limited expansion of the working-age population. If productivity growth also remains low, the sustainable pace of increase of real GDP will be limited and remain noticeably lower than historic norms.

Suggested Citation

  • Richard Peach & Charles Steindel, 2017. "Low Productivity Growth: The Capital Formation Link," Liberty Street Economics 20170626, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednls:87199
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    More about this item

    Keywords

    Depreciation; Capital Stock; Productivity Growth;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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