Labor productivity slowdown in the developed economies: Another productivity puzzle?

The paper addresses the topic of an overall long-term productivity slowdown in labor productivity for a panel of 25 developed countries. Besides studying individual long-term trends of single countries using filtering techniques we also test for multiple structural breakpoints in the long-term trends. Furthermore after determining the country specific long-term productivity trends using state-space approaches, we extract a common factor from these long-term trend series using factor analysis. The country specific differences are only of second order importance. Dominant is an overall long-term productivity slowdown. The beginning of this slowdown already started in the 1970s and has persisted without any significant structural breakpoint afterwards until now. The same analysis for GDP growth and hours worked data were performed. We found similar results for the GDP growth data compared to the productivity data but not for the hours worked data. Furthermore Granger causality tests reveal that the trend productivity slowdown is driven by the downward trending GDP growth and not vice versa. For the hours worked data no significant relation to productivity growth could be confirmed.