World Economic Performance

World Economic Performance

Past, Present and Future

Edited by D. S.P. Rao and Bart van Ark

World economic performance over the last 50 years has been spectacular. The postwar period has witnessed impressive growth rates in Western Europe and Japan, and in recent times China and India. This new book discusses these issues and tackles topical questions such as; what are the socio-economic and institutional factors that have contributed to this impressive performance? Will China and India continue to grow at the same rate over the next two decades? What are the prospects for Japan, the US and other advanced economies? The book brings together contributions by eminent scholars including the late Angus Maddison, Professors Justin Lin, Bob Gordon, Ross Garnaut, Bart van Ark and others to provide answers to these fascinating questions. The chapters analyse the economic performance of selected countries including China, India, Japan, Indonesia and the US, as well as Western Europe, Latin America and developing countries as a group. The time period of the study is from 1850 to the present and includes forecasts to 2030.

Chapter 12: Revisiting U.S. Productivity Growth over the Past Century with a View of the Future

Edited by D. S.P. Rao and Bart van Ark

Subjects: development studies, development economics, economics and finance, development economics, economic psychology, international economics

Extract

This chapter looks ahead 20 years and predicts future growth rates of U.S. labor productivity and potential real GDP. Yet we know nothing about the future unless we understand the past, and this chapter provides a new interpretation of the growth of labor productivity and of multi-factor productivity (MFP) since 1891. Everything in this chapter refers to the U.S. and the reader is referred elsewhere for an interpretation of the divergence of productivity growth in the U.S. and Europe in the postwar period, with a European catching up process through 1995 and a falling back since then (see Dew-Becker and Gordon (2008) and Timmer et al. (2010)). The chapter begins with the short-run facts by providing up-to-date productivity and potential GDP trends based on U.S. quarterly data through the fourth quarter of 2009 (henceforth 2009:Q4). The trends and deviations from trends (i.e., ‘gaps’) are new and constitute an update with improved methodology of my paper (Gordon, 2003) on the 2001–04 ‘explosion’ in U.S. productivity growth. We learn that the productivity explosion in 2001–04 unraveled rapidly in 2004–07 prior to another explosion in 2009.

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