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Monday, December 10, 2007



i think it is obvious such results will be true in the short term. If for some reason employment doesn't grow then the current employees are squeezed more and produce more output. But this cannot be a recipe of long term growth in productivity, such a growth can only come through real technological and organizational advances in companies...


interesting to consider the US as being the shingin light for productivity AND employment growth. I wonder what the employment numbers would look like sliced two ways: an index which weights jobs and average income (somehow - with the likely outcome that new jobs are being gained but they are marginal new jobs - govt, healthcare, steachers etc...) and also what would the productivity emplyemtn curve look like if we strip out .com and say normalize the real estate/construction/mortgage industry over say past five years. I would add that the dead weight losss from real estate commisisons is enormous and that is a bsuiness model that needs to be disintermediated rapidly, with the help of goverment if need be.

Ian D-B

It turns out that the US is not a good example of high productivity and employment. In the paper we show that US employment growth actually slowed substantially following 1995, while productivity picked up. It's certainly the case that productivity growth would have accelerated even without the decline in employment, but it was a help. The explanation for *why* employment growth in the US slowed is that for a long time, we benefited from women entering the labor force. In recent years, that has stopped (see the discussion of the weak recovery in employment coming out of the last recession). On the other hand, it seems that women are working more in Europe than ever before, which has raised employment growth there and held down productivity.

Arthur Eckart

In the late '90s, the U.S. was operating with economic strain, i.e. actual output exceeded potential output, which would slow employment growth. Also, in the late '90s, more Baby-Boomers were entering "prime-age," which would increase productivity. After the quick and massive Creative-Destruction process, mostly between 2000-02, productivity increased, while employment growth slowed. Throughout the 2000s, the U.S. was generally operating with economic slack, i.e. actual output was below potential output, which would increase productivity with slower employment growth. I suspect, over the next few years, the Baby-Boomers will work longer or harder to pay-down debt and build-up saving, which will increase productivity, since the 55-64 age group is the second most productive group (based on education, experience, and training).


Not reading this paper I found somewhat similar results for a cross-country comparison (developed countries) Actually, ratio of productivity, P, and participation rate, LFPR, is developed countries is scalable with a power law with index n. So, any difference in productivity between two countries can be explained using the change in corresponding participation rate:


with between 1 and 5 depending on the pair of countries.

I tested US, UK, Japan, France, Italy, Canada, Sweden

Illustrations and brief explanation in:

Some myths about the slowdown of productivity growth in the USA

Arthur Eckart

Kio, I don't know how you can make that assumption: "There is no change in productivity related to technological shocks," e.g. without differences in hours worked. Also, the Gini Coefficient is a limited and relative measure of income inequality. If disposible income, consumer surplus, consumption patterns, etc. were included, you'd likely find living standards are higher and perhaps less unequal in the U.S. than in the E.U. The Gini Coefficient penalizes the U.S., because the number of higher income earners are increasing at a much faster rate than the U.S. population growth rate.


Logic is simple. If all the changes in (relative)productivity are explained by the change in (relative)labor force participation rate, then nothing else matters.
Gini is a long discussion. I wrote couple papers on estimation of gini ratio related to income distribution as measured by the US Census Bureau and its difference from the IRS. This is a quantitative analysis, so I can not answer your questions in the same manner. I have just numbers and estimates of their standard deviations. My statements are very narrow and are associated with quantitative estimates.

Arthur Eckart

Kio, your chart shows dollars per hour. So, number of hours worked would be relevant.


Well, it is difficult to say. I would prefer $ per hour as the best proxy. any other variable is not justified by theory since includes population difference.
so, if something fits another variable it is a good news.

BlueBerry Pick'n

...zero-sum games are the logical fallacy that totalitarian or fascist states use to justify withholding resources from competitive, or disenfranchised groups.

you know, like the Myanmar junta is using a cyclone to conveniently 'ethnically cleanse' the poor & under-represented cultural groups.

...like in Rwanda & Darfur... does the economist ever consider who they want to be, or the Society in which they wish their children to live? Shock Doctrine

There is enough for everyone... just depends on who defines 'enough' & who defines 'everyone'. The question is sustainability.

ZSG: a convenient excuse to engage in hate, hoarding, "Halleleuiah".

Anybody here ever watch The Corporation? whenever I hear business-analysts or economists talk about ZSGs, I flashback to Carleton Brown" rel="nofollow">oh-so revealing interview.

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All economists know productivity matters more for living standards than just about anything else. But they also know it isn't easy to measure, nor to explain the often large and persistent productivity gaps between nations.


There is no change in productivity related to technological shocks


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The zero-sum property (if one gains, another loses) means that any result of a zero-sum situation is Pareto optimal (generally, any game where all strategies are Pareto optimal is called a conflict game).

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If the game matrix does not have all positive elements, simply add a constant to every element that is large enough to make them all positive. That will increase the value of the game by that constant, and will have no effect on the equilibrium mixed strategies for the equilibrium.


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