Accounting for U.S. Post-War Economic Growth

Abstract

We perform a growth accounting exercise using the whole neoclassical growth model for the U.S. economy during 1954--2017. Our growth accounting exercise reveals that the U.S. extraordinary economic growth in the 1960s has been mainly driven by the increase of the labor efficiency, whereas the growth slowdowns in the 1970s and the first decade of 21th century were mainly driven by the decline in the capital efficiency. However, the reduction of the distortions on the labor supply driven the subsequent recoveries in the 1980s and after the Great Recession.

Keywords: Growth Accounting, Capital-Efficiency Wedge, Labor-Efficiency Wedge, Labor Wedge, Investment Wedge, Resource Constraint Wedge, Productivity, Labor Share, Hours Worked.

JEL Classification: E13, E17, E25, O41, O47.