US labor and total-factor productivity growth slowed prior to the Great Recession. The timing rules out explanations that focus on disruptions during or since the recession, and industry and state ...data rule out "bubble economy" stories related to housing or finance. The slowdown is located in industries that produce information technology (IT) or that use IT intensively, consistent with a return to normal productivity growth after nearly a decade of exceptional IT-fueled gains. A calibrated growth model suggests trend productivity growth has returned close to its 1973-1995 pace. Slower underlying productivity growth implies less economic slack than recently estimated by the Congressional Budget Office. As of 2013, about three-fourths of the shortfall of actual output from (overly optimistic) prerecession trends reflects a reduction in the level of potential.
The future of US economic growth Fernald, John G; Jones, Charles I
The American economic review,
05/2014, Letnik:
104, Številka:
5
Journal Article
Recenzirano
Odprti dostop
Modern growth theory suggests that more than three-quarters of growth since 1950 reflects rising educational attainment and research intensity. As these transition dynamics fade, US economic growth ...is likely to slow at some point. However, the rise of China, India, and other emerging economies may allow another few decades of rapid growth in world researchers. Finally, and more speculatively, the shape of the idea production function introduces a fundamental uncertainty into the future of growth. For example, the possibility that artificial intelligence will allow machines to replace workers to some extent could lead to higher growth in the future.
After 2004, measured growth in labor productivity and total factor productivity slowed. We find little evidence that this slowdown arises from growing mismeasurement of the gains from innovation in ...information technology-related goods and services. First, the mismeasurement of information technology hardware is significant preceding the slowdown. Because the domestic production of these products has fallen, the quantitative effect on productivity was larger in the 1995-2004 period than since then, despite mismeasurement worsening for some types of information technology. Hence, our adjustments make the slowdown in labor productivity worse. The effect on total factor productivity is more muted. Second, many of the tremendous consumer benefits from the "new" economy such as smartphones, Google searches, and Facebook are, conceptually, nonmarket: Consumers are more productive in using their nonmarket time to produce services they value. These benefits raise consumer well-being but do not imply that market sector production functions are shifting out more rapidly than measured. Moreover, estimated gains in nonmarket production are too small to compensate for the loss in overall well-being from slower market sector productivity growth. In addition to information technology, other measurement issues that we can quantify (such as increasing globalization and fracking) are also quantitatively small relative to the slowdown.
Are Technology Improvements Contractionary? Basu, Susanto; Fernald, John G.; Kimball, Miles S.
The American economic review,
12/2006, Letnik:
96, Številka:
5
Journal Article
Recenzirano
Odprti dostop
Yes. We construct a measure of aggregate technology change, controlling for aggregation effects, varying utilization of capital and labor, nonconstant returns, and imperfect competition. On impact, ...when technology improves, input use and nonresidential investment fall sharply. Output changes little. With a lag of several years, inputs and investment return to normal and output rises strongly. The standard one-sector real-business-cycle model is not consistent with this evidence. The evidence is consistent, however, with simple sticky-price models, which predict the results we find: when technology improves, inputs and investment generally fall in the short run, and output itself may also fall.
A typical (roughly) two‐digit industry in the United States appears to have constant or slightly decreasing returns to scale. Three puzzles emerge, however. First, estimates often rise at higher ...levels of aggregation. Second, apparent decreasing returns contradicts evidence of only small economic profits. Third, estimates with value added differ substantially from those with gross output. A representative‐firm paradigm cannot explain these puzzles, but a simple story of aggregation over heterogeneous units can. Theory and evidence on aggregation invalidate the common use of demand‐side instruments. Finally, we discuss implications of heterogencity for macroeconomic modeling: A one‐sector macroeconomic model that ignores heterogeneity may sometimes require firm‐level parameters, but at other times the model may require the “biased” aggregate parameters.
The Disappointing Recovery of Output after 2009 FERNALD, JOHN G.; HALL, ROBERT E.; STOCK, JAMES H. ...
Brookings papers on economic activity,
04/2017, Letnik:
2017, Številka:
1
Journal Article
Recenzirano
Odprti dostop
U.S. output has expanded only slowly since the recession trough in 2009, even though the unemployment rate has essentially returned to a precrisis, normal level. We use a growth-accounting ...decomposition to explore explanations for the output shortfall, giving full treatment to cyclical effects that, given the depth of the recession, should have implied unusually fast growth. We find that the growth shortfall has almost entirely reflected two factors: the slow growth of total factor productivity, and the decline in labor force participation. Both factors reflect powerful adverse forces that are largely unrelated to the financial crisis and recession—and that were in play before the recession.
We use a broad set of Chinese economic indicators and a dynamic factor model framework to estimate Chinese economic activity and inflation as latent variables. We incorporate these latent variables ...into a factor-augmented vector autoregression (FAVAR) to estimate the effects of Chinese monetary policy on the Chinese economy. A FAVAR approach is particularly well-suited to this analysis due to concerns about Chinese data quality, a lack of a long history for many series, and the rapid institutional and structural changes that China has undergone. We find that increases in bank reserve requirements reduce economic activity and inflation, consistent with previous studies. In contrast to much of the literature, however, we find that central-bank determined changes in Chinese interest rates also have substantial impacts on economic activity and inflation, while other measures of changes in credit conditions, such as shocks to M2 or lending levels, do not once other policy variables are taken into account. Overall, our results indicate that the monetary policy transmission channels in China have moved closer to those of Western market economies.
•Estimate Chinese economic activity and inflation as latent variables.•Incorporate these estimates into FAVAR specification for China.•Increases in reserve requirements and interest rates reduce activity and inflation.•Results suggest Chinese monetary policy closer to Western market economies.
Structural vector autoregressions with long-run restrictions are extraordinarily sensitive to low-frequency correlations. Recent literature finds that the estimated effects of technology shocks are ...sensitive to how one treats hours per capita. However, after allowing for (statistically and economically significant) trend breaks in productivity, results are much less sensitive: hours fall when technology improves. The issue is that the common high–low–high pattern of productivity growth and hours (i.e., the low-frequency correlation) inevitably leads to a positive estimated response. The trend breaks control for this correlation. This example suggests a practical need for care in using long-run restrictions.
We use Chinese imports, measured as reported exports of trading partners, as a benchmark to gauge the accuracy of alternative Chinese indicators (including GDP) of fluctuations in economic activity. ...Externally-reported imports are likely to be relatively well-measured and free from domestic manipulation. Using principal components, we derive activity indices from a wide range of indicators. We choose a preferred index of eight non-GDP indicators based on their fit to Chinese imports, which we call the China Cyclical Activity Tracker (or C-CAT). We find that Chinese statistics have broadly become more reliable in measuring cyclical fluctuations over time. However, measured GDP has been excessively smooth since 2013, and adds little information relative to combinations of other indicators.
Does the positive correlation between infrastructure and productivity reflect causation? If so, in which direction? I find that when growth in roads (the largest component of infrastructure) changes, ...productivity growth changes disproportionately in U.S. industries with more vehicles. That vehicle-intensive industries benefit more from road-building suggests that roads are productive. At the margin, however, road investments do not appear unusually productive. Intuitively, the interstate system was highly productive, but a second one would not be. Road-building thus explains much of the productivity slowdown through a one-time, unrepeatable productivity boost in the 1950's and 1960's.
PDF
