Time-varying endogenous productivity growth dynamics

Jose Barrales-Ruiz (), Gyeongho Kim () and Ivan Mendieta-Muñoz
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Jose Barrales-Ruiz: Faculty of Economics and Government, Universidad San Sebastian
Gyeongho Kim: Department of Economics, University of Utah

No 2515, Working Papers from New School for Social Research, Department of Economics

Abstract: This paper provides an empirical analysis of the dynamic determinants of US labor productivity growth by considering that the latter is an endogenous outcome, mainly influenced by changes in the size of the economy and relative labor costs. Specifically, we consider that changes in GDP, real wages, wages relative to the price of capital, and investment effect simultaneously the evolution of labor productivity growth. We focus on studying whether the response of the latter to these effects has been stable or time-varying by adopting a flexible hybrid time-varying parameter Bayesian vector autoregression with stochastic volatility empirical framework. This allows us identify whether none, some, or all lagged and contemporaneous coefficients in the equations in the model are constant or time-varying via model selection. We find: (i) evidence supporting the view of time-varying endogenous labor productivity growth dynamics; (ii) that the response of labor productivity growth to GDP growth has tended to increase over time; and (iii) that the response of labor productivity growth to real wage growth has tended to decrease over time. Our findings have important policy recommendations that can help to improve the future performance of labor productivity growth in the USA.

Keywords: Labor productivity growth; induced technical change effect; Kaldor-Verdoorn effect; model selection; time-varying parameter vector autoregressions (search for similar items in EconPapers)
JEL-codes: B50 C11 C32 C52 E12 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2025-11
New Economics Papers: this item is included in nep-eff, nep-ets and nep-hme
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Working Paper: Time-varying endogenous productivity growth dynamics (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:2515

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