A Note on “Puzzles, Paradoxes, and Regularities: Cyclical and Structural Productivity in the United States (1950–2005)”

Abstract

Jeon and Vernengo apply Okun’s Law and Verdoorn’s Law to examine the cyclical and structural effects of output growth on productivity. Their estimation method, however, is flawed, and their results are not robust. New estimates indicate that less of the variation in labor productivity growth is explained, that the Verdoorn and Okun coefficients are unstable over time, and that the results after 1973 are inconsistent with Kaldor’s interpretation of Verdoorn’s Law. JEL Classification: E32; O47; O51