Aggregate Implications of Changing Sectoral Trends

Andrew Foerster, Andreas Hornstein, Pierre Daniel Sarte and Mark Watson
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Mark Watson: Princeton University and NBER

Working Papers from Princeton University. Economics Department.

Abstract: We find disparate trend variations in TFP and labor growth across major U.S. production sectors and study their implications for the post-war secular decline in GDP growth. Capital accumulation and the network structure of U.S. production amplify the effects of sector-specific changes in the trend growth rates of TFP and labor on trend GDP growth. We summarize this amplification effect in terms of sectoral multipliers that, for some sectors, can exceed 3 times their value added shares in the economy. We estimate that sector-specific factors have historically accounted for approximately 3/4 of long-run changes in GDP growth, leaving common or aggregate factors to explain only 1/4 of those changes. Trend GDP growth fell by nearly 3 percentage points over the post war period with the Construction sector alone contributing roughly 1 percentage point of that decline between 1950 and 1980. Idiosyncratic changes to trend growth in the Durable Goods sector then contributed an almost 2 percentage point decline in trend GDP growth between 2000 and the end of our sample in 2018. Remarkably, no sector has contributed any steady significant increase to the trend growth rate of GDP in the past 70 years.

Keywords: trend growth; sectoral linkages; investment network (search for similar items in EconPapers)
JEL-codes: C32 E23 O41 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-his, nep-mac and nep-tid
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http://www.princeton.edu/~mwatson/papers/FHSW_Manuscript_20210426.pdf

Related works:
Journal Article: Aggregate Implications of Changing Sectoral Trends (2022)
Working Paper: Aggregate Implications of Changing Sectoral Trends (2022)
Working Paper: Aggregate Implications of Changing Sectoral Trends (2019)
Working Paper: Aggregate Implications of Changing Sectoral Trends (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2021-54

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