POTENTIAL GNP IN THE UNITED STATES, 1948–80

Peter Clark

Review of Income and Wealth, 1979, vol. 25, issue 2, 141-165

Abstract: Potential gross national product (GNP) is a measure of the aggregate supply capability of an economy, or the amount of output that could be expected at full employment. Such a measure of output at constant rates of labor and capital utilization is useful as a benchmark for economic performance, calculation of the full employment surplus as an indicator of fiscal policy, and in the projection of unemployment rates. Potential GNP for the United States is estimated for the years 1948–77, and projected for 1978–80. The calculations use a variable benchmark for the full‐employment unemployment rate, based on the changing age‐sex composition of the labor force, and a constant benchmark for the utilization of fixed capital. A framework for separation of productivity into trend, cycle, and irregular components is developed, and then estimated for the 1948–77 period, using quarterly data. The relationships between various age‐ and sex‐specific unemployment rates are also estimated in construction of the variable unemployment benchmark.

Date: 1979
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