Unproductive by Choice: Substitution and the Slowdown in Aggregate Productivity Growth in the United States

12 Pages Posted: 21 Jul 2019

Date Written: July 20, 2019

Abstract

I propose a new decomposition of aggregate total factor productivity using a model where productivity is an index of unmeasured factors of production. The decomposition uses the conditional factor demand for the unmeasured factors. In this model, changes in the effective price of labor and capital can cause substitution to or from productivity. I study whether such changes explain the slowdown in US productivity growth from 2005 to 2016. I find that if not for the declining growth rate of the effective price of labor and capital encouraging substitution away from productivity, productivity growth would be accelerating.

Keywords: Productivity, United States Productivity Growth, Aggregate Productivity, Endogenous Productivity

JEL Classification: E23, E22, O47

Suggested Citation

Flynn, Zach, Unproductive by Choice: Substitution and the Slowdown in Aggregate Productivity Growth in the United States (July 20, 2019). Available at SSRN: https://ssrn.com/abstract=3368575 or http://dx.doi.org/10.2139/ssrn.3368575

Zach Flynn (Contact Author)

Afiniti ( email )

1701 Pennsylvania Ave
Washington, DC 20006
United States

HOME PAGE: http://zflynn.com

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