The US Productivity Slowdown, the Baby Boom, and Management Quality

James Feyrer

No 15474, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines whether management changes caused by the entry of the baby boom into the workforce explain the US productivity slowdown in the 1970s and resurgence in the 1990s. Lucas (1978) suggests that the quality of managers plays a significant role in determining output. If there is heterogeneity across workers and management skill improves with experience, an influx of young workers will lower the overall quality of management and lower total factor productivity. Census data shows that the entry of the baby boom resulted in more managers being hired from the smaller, pre baby boom cohorts. These marginal managers were necessarily of lower quality. As the boomers aged and gained experience, this effect was reversed, increasing managerial quality and raising total factor productivity. Using the Lucas model as a framework, a calibrated model of managers, workers, and firms suggests that the management effects of the baby boom may explain roughly 20 percent of the observed productivity slowdown and resurgence.

JEL-codes: E0 E25 J1 J11 O33 O4 O47 O51 (search for similar items in EconPapers)
Date: 2009-11
Note: EFG LS PR
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