Interpreting the "One Big Wave" in U.S. Long-Term Productivity Growth
This paper assesses the standard data on output, labor input, and capital input, which imply one big wave' in multi-factor productivity (MFP) growth for the United States since 1870. The wave-like pattern starts with slow MFP growth in the late 19th century, then an acceleration peaking in 1928-50, and then a deceleration to a slow rate after 1972 that returns to the poor performance of 1870-1891. A counterpart of the standard data is a mysterious doubling in the ratio of output to capital input when the postwar era is compared with 1870-1929. Three types of measurement adjustments are applied to the standard input data. Following the lead of Denison and Jorgenson-Griliches, adjustments for the changing composition (or quality') of labor and capital, currently published by the BLS back to 1948, are estimated for 1870-1948. These composition adjustments take into account the shifting mix of the labor force along the dimensions of education and age-sex composition, and of the capital stock between equipment and structures. Further adjustments are made to capital input data to allow retirement to vary with gross investment rather than to follow a fixed pattern depending only on age, and to add types of capital owned by the government that are particularly productive in the private sector. A new MFP series taking account of all these adjustments grows more slowly throughout, and the big wave' phenomenon is both flatter and extends back further in time to 1891. However, there is no solution to the post-1972 productivity slowdown, and in the new data MFP growth during 1972-96 proceeds at a pathetic 0.1 percent per year. A byproduct of the measurement adjustments is to solve completely the previous puzzle of the jump in the output-capital ratio; in the new data this ratio is actually lower in 1996 than in 1870. The primary substantive explanation for the big wave lies in the timing of inventions. MFP growth during the big wave' period benefited from the diffusion of four great clusters of inventions that dwarf today's information technology revolution in their combined importance. A complementary hypothesis is that the partial closing of American labor markets to immigration and of American goods markets to imports during the big wave period gave an artificial and temporary boost to real wages which fed back into boosting productivity growth, followed by a reopening that contributed to the post-1972 productivity slowdown.
|Date of creation:||Jun 2000|
|Publication status:||published as Gordon, Robert J. (ed.) Productivity growth, inflation, and unemployment: The collected essays of Robert J. Gordon, With a foreword by Robert M. Solow. Cambridge; New York and Melbourne: Cambridge University Press, 2004.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Blanchard, Olivier Jean & Quah, Danny, 1989.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances,"
American Economic Review,
American Economic Association, vol. 79(4), pages 655-673, September.
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
- Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
- David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-361, May.
- Feldstein, Martin S & Rothschild, Michael, 1974. "Towards an Economic Theory of Replacement Investment," Econometrica, Econometric Society, vol. 42(3), pages 393-423, May.
- Nordhaus, William D., 1982. "Economic policy in the face of declining productivity growth," European Economic Review, Elsevier, vol. 18(1), pages 131-157.
- Nordhaus, William D., 1982. "Economic policy in the face of declining productivity growth," European Economic Review, Elsevier, vol. 18(2), pages 131-157.
- William D. Nordhaus, 1981. "Economic Policy in the Face of Declining Productivity Growth," Cowles Foundation Discussion Papers 604, Cowles Foundation for Research in Economics, Yale University.
- Johnson, G. & Stafford, F., 1992. "Models of Real Wages and International Competition," Working Papers 314, Research Seminar in International Economics, University of Michigan.
- John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1, June.
- repec:fth:michin:314 is not listed on IDEAS
- Claudia Goldin & Lawrence F. Katz, 1999. "The Returns to Skill in the United States across the Twentieth Century," NBER Working Papers 7126, National Bureau of Economic Research, Inc.
- Goldin, Claudia, 1998. "America's Graduation from High School: The Evolution and Spread of Secondary Schooling in the Twentieth Century," The Journal of Economic History, Cambridge University Press, vol. 58(02), pages 345-374, June.
- Goldin, Claudia, 1998. "America's Graduation from High School: The Evolution and Spread of Secondary Schooling in the Twentieth Century," Scholarly Articles 2664307, Harvard University Department of Economics.
- J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 445-502.
- J. Bradford De Long & Lawrence H. Summers, "undated". "Equipment Investment and Economic Growth," J. Bradford De Long's Working Papers _122, University of California at Berkeley, Economics Department.
- J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc.
- Martin Neil Baily & Robert J. Gordon, 1988. "The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 347-432.
- Simon Kuznets & Elizabeth Jenks, 1961. "Capital in the American Economy: Its Formation and Financing," NBER Books, National Bureau of Economic Research, Inc, number kuzn61-1, June.
- Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1, June.
- Jorgenson, Dale W., 1966. "The Embodiment Hypothesis," Scholarly Articles 3403063, Harvard University Department of Economics.
- Timothy J. Hatton & Jeffrey G. Williamson, 1992. "International Migration and World Development: A Historical Perspective," NBER Historical Working Papers 0041, National Bureau of Economic Research, Inc.
- Williamson, J.G. & Hatton, J.T., 1992. "International Migration and World Development: A Historical Perspective," Harvard Institute of Economic Research Working Papers 1606, Harvard - Institute of Economic Research.
- repec:ucp:bknber:9780226074153 is not listed on IDEAS
- Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 385-406, June.
- George J. Borjas, 1994. "Long-Run Convergence of Ethnic Skill Differentials: The Children and Grandchildren of the Great Migration," ILR Review, Cornell University, ILR School, vol. 47(4), pages 553-573, July.
- Dale W. Jorgenson, 1966. "The Embodiment Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 74, pages 1-1.
- George J. Borjas, 1994. "Long-Run Convergence of Ethnic Skill Differentials," NBER Working Papers 4641, National Bureau of Economic Research, Inc.
- Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters,in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
- Nathan S. Balke & Robert J. Gordon, 1988. "The Estimation of Prewar GNP: Methodology and New Evidence," NBER Working Papers 2674, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7752. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.