For the archives: the decline in productivity
Posted by Charles II on December 27, 2012
I linked the following Fed Letter by Fabina and Wright in comments below and wanted to promote it to a post.
In this Chicago Fed Letter, we describe the recent behavior of productivity in the United States and in other advanced economies around the world. We show that there has been a dramatic reduction in the rate of growth of productivity across almost all advanced economies over the past ten years. Moreover, this reduction began prior to the onset of the global economic crisis and, hence, it appears to reflect a fundamental decline in the rate of growth of efficiency of economies, not simply declines in factor utilization.
The authors don’t reach any firm conclusions on cause. I tend to think that measurement is the main issue, with trade being the culprit, but there’s no doubt that investment in human capital and infrastructure has declined in the US and many other western countries. It also seems likely that all the investment in repression (war, surveillance, border control) by western countries is a low-return investment. But it’s worth thinking about.
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