Working Paper: CEPR ID: DP410
Authors: Julia Darby; Simon Wren-Lewis
Abstract: The paper estimates underlying labour-productivity growth for each of the G7 countries over the last two decades. Underlying productivity is proxied by a stochastic trend, which is estimated using the Kalman filter. This technique allows the data to determine when changes in growth have occurred and is therefore less ad hoc than the split trends or dummy variables normally used. The results show that the decline in underlying productivity growth in the 1970s was far from uniform across countries. While relative growth rates in Europe in the 1980s are broadly consistent with the convergence hypothesis, US trends do not appear at present to be significantly below average.
Keywords: underlying productivity; stochastic trends
JEL Codes: 226; 211
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| relative factor prices (F16) | underlying productivity growth (O49) |
| structural economic factors (L16) | underlying productivity growth (O49) |
| employment adjustments (J63) | underlying productivity growth (O49) |
| underlying productivity growth (1970s) (O49) | productivity growth rates (G7 countries) (O47) |
| current relative positions among European countries (O52) | convergence hypothesis (F62) |