The role of output composition in the stabilization of US output growth

Abstract

US output growth became much more stable over the past half-century. This paper assesses the role of changes in the composition of output—the increasing importance of stable sectors and diminishing importance of volatile sectors—in this stabilization. Our decomposition of output growth volatility by one-digit industry indicates that a bit less than half of the drop in volatility between the pre- and post-1982 periods is accounted for by compositional shifts, most notably the decline of manufacturing.