Stagnation Vs Singularity: The Global Implications of Alternative Productivity Growth Scenarios

74 Pages Posted: 21 Mar 2019

See all articles by Warwick J. McKibbin

Warwick J. McKibbin

Australian National University

Adam Triggs

Australian National University (ANU)

Date Written: March 19, 2019

Abstract

Productivity growth has flat-lined in most economies despite rapid advances in technology. Economists suggest competing explanations for this paradox. Some argue the current stagnation will persist given deep structural challenges, arguing that recent technological advances are no match for those of the past. Others argue that the historical time-lag between technological advances and increased productivity means a productivity surge is just around the corner. The paper explores the implications of alternative productivity growth scenarios for the global economy, particularly for growth, labor markets and the flows of trade and capital. The paper explores the appropriate policy response under these alternative scenarios. It highlights the importance of productivity-enhancing reforms and the first-mover benefits that can flow to economies which move closer to the productivity frontier. It explores the factors that constrain an economy’s ability to reap the full benefits of any future productivity boom. It highlights the consequences of asymmetric increases in productivity across countries for both booming and non-booming economies and the role of monetary and fiscal policies, with particular warnings for the stability of the euro zone. Finally, it highlights the implications of asymmetric productivity changes across sectors and the importance of flexibility in labor, capital and product markets.

Keywords: econometric modelling, computable general equilibrium models, productivity, monetary policy, fiscal policy, international trade and finance, globalization

JEL Classification: C5, C68, D24, E2, E5, E6, E62, F1, F2, F3, F4, F6

Suggested Citation

McKibbin, Warwick J. and Triggs, Adam, Stagnation Vs Singularity: The Global Implications of Alternative Productivity Growth Scenarios (March 19, 2019). CAMA Working Paper No. 26/2019. Available at SSRN: https://ssrn.com/abstract=3356095 or http://dx.doi.org/10.2139/ssrn.3356095

Warwick J. McKibbin (Contact Author)

Australian National University ( email )

Crawfrod School of Public Policy
Canberra, ACT 2600
Australia
02-61250301 (Phone)
02-62735575 (Fax)

HOME PAGE: http://www.sensiblepolicy.com

Adam Triggs

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

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