Accounting for U.S. Post-War Economic Growth

Abstract

We develope a growth accounting method using the whole neoclassical growth model. We obtain three primary findings from our analysis of the U.S. economy during 1954--2017. First, the efficiency wedges in the entire period accurately account for the evolution of U.S. productivity and labor share. Second, the labor wedge was the main force driving the recovery of output and worked hours per capita in the eighties and nineties as well as after the Great Recession. Finally, if factor shares adjust competitively, the main force driving the U.S. growth slowdown of both the seventies and the first decade of this century was the capital-efficiency wedge and the forces driving the U.S. Great Recession are not very different from the forces working in other OECD economies and those driving the 1982 Recession in the United States.