Aspects of Productivity Measurement

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9311671 Gordon There is widespread agreement that slow productivity growth over the past two decades is the greatest economic problem faced by the United States. While the importance of U.S. productivity is widely recognized, economists have as yet made little progress in understanding the phenomenon. The post-1982 slowdown in the growth rates of average labor productivity and multi-factor productivity have withstood the efforts of economists to provide a single-cause explanation, including fluctuations of energy prices, inadequate private investment, inadequate infrastructure investment, excessive government regulation, and declining educational scores. While some of these may make a partial contribution, even when combined they appear to leave most of the slowdown unexplained. This ongoing research project takes a comprehensive approach to the study of slow U.S. productivity. Its focus combines three dimensions - (1) long-run historical, (2) cross-country, and (3) individual industry studies - and attempts by studying these dimensions singly and in combination to develop an improved degree of understanding. Contrary to conventional wisdom, over the past 120 years productivity growth in the U.S. displays the pattern of "one big wave," slow from 1870 to 1913, rapid from 1913 to 1964 (peaking in 1928-50), and slow again after 1964. The project attempts to isolate the industrial sectors where the big wave occurs, assess its statistical accuracy, and develop hypotheses to explain it. The cross-country aspect of the research detailed industry-by- industry data on productivity for other large nations to identify the largest differences between the U.S. It assesses the role of differing measurement methodology in accounting for the differences. Finally, a detailed industry study will be carried out for the U.S. construction sector, which has exhibited negative measured productivity growth since the mid-1960s. ***