Working Paper: NBER ID: w15474
Authors: James Feyrer
Abstract: This paper examines whether management changes caused by the entry of the baby boom into the workforce explain the US productivity slowdown in the 1970s and resurgence in the 1990s. Lucas (1978) suggests that the quality of managers plays a significant role in determining output. If there is heterogeneity across workers and management skill improves with experience, an influx of young workers will lower the overall quality of management and lower total factor productivity. Census data shows that the entry of the baby boom resulted in more managers being hired from the smaller, pre baby boom cohorts. These marginal managers were necessarily of lower quality. As the boomers aged and gained experience, this effect was reversed, increasing managerial quality and raising total factor productivity. Using the Lucas model as a framework, a calibrated model of managers, workers, and firms suggests that the management effects of the baby boom may explain roughly 20 percent of the observed productivity slowdown and resurgence.
Keywords: productivity; baby boom; management quality; demographic change
JEL Codes: E0; E25; J1; J11; O33; O4; O47; O51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Entry of baby boom cohort into the workforce (J21) | Decrease in management quality (L15) |
| Decrease in management quality (L15) | Productivity slowdown in the 1970s (O49) |
| Aging of baby boomers (J26) | Improvement in management quality (L15) |
| Improvement in management quality (L15) | Productivity resurgence in the 1990s (O49) |