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The "End-of-Expansion" Phenomenon in Short-run Productivity Behavior

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  • Robert J. Gordon

Abstract

This paper makes no contribution to an understanding of the secular slowdown in productivity, except to add a new cyclical correction of the long-run trend. Its main objective is to examine the short-run behavior of aggregate labor productivity in isolation. In addition to the phenomenon of short-run "increasing returns to labor" identified in previous studies, it isolates an often overlooked but consistent tendency for productivity to perform poorly in the last stages of a business expansion. In 1956, 1960, 1969,1973, and now again in 1979, a productivity shortfall has developed, with absolute declines in the level of productivity occurring in every episode except the first, and in every episode before 1979 the shortfall has subsequently been made up. The paper is more successful in identifying this "end-of-expansion" phenomenon than in explaining it; the results suggest that firms tend consistently to hire more workers in the last stages of a business expansion than is justified by the level of output.

Suggested Citation

  • Robert J. Gordon, 1980. "The "End-of-Expansion" Phenomenon in Short-run Productivity Behavior," NBER Working Papers 0427, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0427
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    Cited by:

    1. Martin S. Eichenbaum, 1991. "Technology shocks and the business cycle," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 15(Mar), pages 14-31.
    2. Temin, Peter & Voth, Hans-Joachim, 2005. "Credit rationing and crowding out during the industrial revolution: evidence from Hoare's Bank, 1702-1862," Explorations in Economic History, Elsevier, vol. 42(3), pages 325-348, July.
    3. Hamermesh, Daniel S, 1989. "Labor Demand and the Structure of Adjustment Costs," American Economic Review, American Economic Association, vol. 79(4), pages 674-689, September.
    4. Timothy Cogley, 1997. "Evaluating non-structural measures of the business cycle," Economic Review, Federal Reserve Bank of San Francisco, pages 3-21.
    5. Olivier J. Blanchard & Mark W. Watson, 1986. "Are Business Cycles All Alike?," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 123-180, National Bureau of Economic Research, Inc.
    6. 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.
    7. Hamermesh, Daniel S. & Burda, Michael & Genadek, Katie R., 2015. "Not Working At Work: Loafing, Unemployment and Labor Productivity," CEPR Discussion Papers 10712, C.E.P.R. Discussion Papers.
    8. Gittleman, Maury & ten Raa, Thijs & Wolff, Edward N., 2006. "The vintage effect in TFP-growth: An analysis of the age structure of capital," Structural Change and Economic Dynamics, Elsevier, vol. 17(3), pages 306-328, September.
    9. James N. Devine, 1987. "Cyclical Over-Investment and Crisis in a Labor-Scarce Economy," Eastern Economic Journal, Eastern Economic Association, vol. 13(3), pages 271-280, Jul-Sep.
    10. Burda, Michael & Hamermesh, Daniel S. & Genadek, Katie R., 2017. "Non-Work at Work, Unemployment and Labor Productivity," CEPR Discussion Papers 12087, C.E.P.R. Discussion Papers.
    11. Brauninger, Michael & Pannenberg, Markus, 2002. "Unemployment and productivity growth: an empirical analysis within an augmented Solow model," Economic Modelling, Elsevier, vol. 19(1), pages 105-120, January.
    12. Julio J. Rotemberg & Michael Woodford, 1994. "Is the Business Cycles a Necessary Consequence of Stochastic Growth?," NBER Working Papers 4650, National Bureau of Economic Research, Inc.
    13. Eichenbaum, Martin, 1991. "Real business-cycle theory : Wisdom or whimsy?," Journal of Economic Dynamics and Control, Elsevier, vol. 15(4), pages 607-626, October.
    14. Jack H. Beebe & Jane Haltmaier, 1980. "An intersectoral analysis of the secular productivity slowdown," Economic Review, Federal Reserve Bank of San Francisco, issue Fall, pages 7-28.
    15. repec:hum:wpaper:sfb649dp2015-033 is not listed on IDEAS
    16. Jeremy J. Nalewaik, 2011. "Forecasting recessions using stall speeds," Finance and Economics Discussion Series 2011-24, Board of Governors of the Federal Reserve System (U.S.).
    17. Riggi, Marianna, 2019. "Capital Destruction, Jobless Recoveries, And The Discipline Device Role Of Unemployment," Macroeconomic Dynamics, Cambridge University Press, vol. 23(2), pages 590-624, March.
    18. Benjamin M. Friedman, 1981. "Financing Capital Formation in the 1980s: Issues for Public Policy," NBER Working Papers 0745, National Bureau of Economic Research, Inc.
    19. Michele I. Naples, 1988. "Industrial Conflict, the Quality of Worklife, and the Productivity Slowdown in U.S. Manufacturing," Eastern Economic Journal, Eastern Economic Association, vol. 14(2), pages 157-166, Apr-Jun.
    20. J. Bradford De Long & Lawrence H. Summers, 1984. "Are Business Cycles Symmetric?," NBER Working Papers 1444, National Bureau of Economic Research, Inc.
    21. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-273, April.
    22. Voth, Joachim, 2005. "Credit Rationing and Crowding Out During the Industrial Revolution," Department of Economics, Working Paper Series qt4qw3v8q6, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    23. Maki, Wilbur R. & Meagher, Patrick D. & Laulainen, Leonard A., Jr., 1980. "Economic Trade-Off Analysis Of State Industrial Development Policies," Staff Papers 13769, University of Minnesota, Department of Applied Economics.

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