Issues in the Analysis of Capital Formation and Productivity Growth
FOR NEARLY TWO DECADES between World War II and the mid-1960s, real output per hour of labor input in the private sector of the U.S. economy grew at an average rate of nearly 3 percent a year. Since then, this measure of labor productivity has decelerated noticeably, first to about 2 percent a year between 1965 and 1973, and then to 1 percent or less a year between 1973 and 1978. This slowdown is an important macroeconomic phenomenon that has sparked interest in the academic community, t he government, and the business press. Although there can be no doubt that growth of labor productivity, however defined, has slowed dramatically in the past ten or fifteen years, the particular data us ed to measure the growth of input and output have a substantial effect on the estimated magnitude of the slowdown, and an even more important influence on estimates of what caused it. In this paper I present different measures of real output, labor input, and capital input for the private nonfarm nonresidential business sector of the U.S. economy, and compare the results obtained by choosing various sets of series to analyze recent productivity trends.