Estimates of Future Productivity Growth
January 24, 2002
Economists have been trying to anticipate the rate of future U.S. productivity, once the economy gets back on track. Whether the rate is fast or slow will determine the future course of wages, profits and federal revenues.
Some new studies paint an optimistic picture of future productivity growth:
- Federal Reserve economists Stephen D. Oliner and Dan E. Sichel peg productivity growth at 2 percent to 2.75 percent a year in coming years.
- By comparison, productivity grew by roughly 2.3 percent a year from 1995 to 2001.
- Dale W. Jorgenson and Mun S. Ho of Harvard and Kevin J. Stiroh of the Federal Reserve Bank of New York say it could grow 2.25 percent a year -- but they offer a wider range of 1.3 to 3 percent.
- A former chairman of the Council of Economic Advisers, Martin N. Baily, favors a range of 2 to 2.5 percent.
Other economists view these projections as overly optimistic. For instance, some projections assume that semiconductor and computer prices will fall at the same stunning pace they did in the late 1990s -- or not much more slowly.
Source: Jeff Madrick (Cooper Union), "Economic Scene: Optimists Need a Warning Label When It Comes to Forecasting Productivity," New York Times, January 24, 2002.
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