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Dynamics of Output and Employment in the U.S. Economy

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  • Deepankar Basu
  • Duncan K. Foley

Abstract

This paper investigates the changing relationship between employment and real output in the U.S. economy from 1948 to 2010 both at the aggregate level and at some major industry-grouping levels of disaggregation. Real output is conventionally measured as value added corrected for price inflation, but there are some industries in which no independent measure of value added is possible and existing statistics depend on imputing value added to equal income. Indexes of output that exclude these imputations are closely correlated with employment over the whole period, and remain more closely correlated during the current business cycle. This analysis o ffers insights into deeper structural changes that have taken place in the U.S. economy over the past few decades in a context marked by the following three factors: (i) the service (especially the financial) sector has grown in importance, (ii) the economy has become more globalized, and (iii) the policy orientation has increasingly become neoliberal. We demonstrate an economically signi ficant reduction in the coefficient relating employment growth to output growth over the business cycles since 1985. Some of this change is due to sectoral shifts toward services, but an important part of it reflects a reduction in the coefficient for the goods and material value-adding sectors.

Suggested Citation

  • Deepankar Basu & Duncan K. Foley, 2011. "Dynamics of Output and Employment in the U.S. Economy," Working Papers wp248, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp248
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    References listed on IDEAS

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    1. "Heterodox Economists Don't Do Math" Reader
      by Mike Isaacson in Vulgar Economics on 2015-06-16 22:00:00

    Citations

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    Cited by:

    1. Jacob Assa, 2016. "The Financialization of GDP and its Implications for Macroeconomic Debates," Working Papers 1610, New School for Social Research, Department of Economics.
    2. Afşin Şahin & Aysit Tansel & M. Hakan Berument, 2015. "Output–Employment Relationship Across Sectors: A Long- Versus Short-Run Perspective," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 265-288, July.
    3. Chinn, Menzie & Ferrara, Laurent & Mignon, Valérie, 2014. "Explaining US employment growth after the great recession: The role of output–employment non-linearities," Journal of Macroeconomics, Elsevier, pages 118-129.
    4. Jonathan F. Cogliano, 2017. "Surplus Value Production and Realization in Marxian Theory - Applications to the U.S., 1987-2015," Working Paper Series 2017-01, Dickinson College, Department of Economics.
    5. Jacob Assa, 2017. "Leveraged Growth: Endogenous Money and Speculative Credit in a Stock-flow Consistent Measure of Output," Working Papers 1727, New School for Social Research, Department of Economics.
    6. Jochen Hartwig, 2014. "Testing Okun’s law with Swiss industry data," Applied Economics, Taylor & Francis Journals, vol. 46(29), pages 3581-3590, October.
    7. Valadkhani, Abbas & Smyth, Russell, 2015. "Switching and asymmetric behaviour of the Okun coefficient in the US: Evidence for the 1948–2015 period," Economic Modelling, Elsevier, vol. 50(C), pages 281-290.
    8. Jacob Assa, 2015. "Financial Output as Economic Input: Resolving the Inconsistent Treatment of Financial Services in the National Accounts," Working Papers 1501, New School for Social Research, Department of Economics.
    9. Robert A. Blecker, 2013. "Economic Stagnation in the United States: Underlying Causes and Global Consequences," Working Papers 2013-16, American University, Department of Economics.
    10. Basu, Deepankar & Das, Debarshi, 2015. "Employment Elasticity in India and the U.S., 1977-2011: A Sectoral Decomposition Analysis," UMASS Amherst Economics Working Papers 2015-07, University of Massachusetts Amherst, Department of Economics.

    More about this item

    Keywords

    Okun's Law; Kaldor-Verdoorn E ect; Global restructuring; measurement of real output;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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