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Vanishing procyclicality of productivity?: industry evidence

J. Christina Wang

No 14-15, Working Papers from Federal Reserve Bank of Boston

Abstract: The robust performance of U.S. labor productivity (LP) early in the recovery from the Great Recession contrasts markedly with the sluggish growth of output, and even more with the lack of recovery in employment. This pattern has renewed interest in understanding why productivity has become much less procyclical in recent decades. This is an important topic because the cyclicality of productivity has implications for how we model business cycles, and our understanding of how they are propagated. The topic also has implications for monetary policy because it affects the trend-cycle decomposition and in turn the projection of trend growth as well as the assessment of the economy's output gap. A number of papers have investigated the aggregate time-series data and proposed mechanisms that may explain the observed changes. Those papers rely entirely on dynamic stochastic general equilibrium models. This study, in contrast, uses the cross-industry dimension as an alternative and complementary method for identifying the mechanisms that have led to the diminished procyclicality of productivity.

Keywords: productivity; exporters; productivity premium; openness (search for similar items in EconPapers)
JEL-codes: D24 E22 E24 E32 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2014-12-31
New Economics Papers: this item is included in nep-eff and nep-mac
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