What Will Revive U.S. Economic Growth? Lessons from a Prototype Industry-Level Production Account for the United States

The objective of this paper is to provide a new historical perspective on postwar US economic growth and consider the prospects for reviving growth in the future. For this purpose we have constructed a data set on the growth of output and productivity by industry for the period 1947–2010. This covers 65 industries and uses the North American Industry Classification System (NAICS). We incorporate output for each industry as well as inputs of capital (K), labor (L), energy (E), materials (M), and services (S). Productivity is the ratio of output to input. These data comprise a prototype industry-level production account within the framework of the US National Income and Product Accounts (NIPAs). We begin with a brief summary of the methodology for productivity measurement at the industry level. The focus of productivity measurement has shifted from the economy as a whole to individual industries, especially those involved in the production and use of IT. Schreyer's OECD (2001) manual, Measuring Productivity, has established international standards for economy-wide and industry-level productivity measurement. Our methodology is consistent with the OECD standards. We illustrate the application of the prototype industry-level production account by analyzing data for the postwar US for three broad periods. These are the Postwar Recovery, 1947–1973, the Long Slump after the 1973 energy crisis, 1973–1995, and the period of Growth and Recession, 1995–2010. To provide more detail on the period of Growth and Recession, we consider the sub-periods 1995–2000, 2000–2005, and 2005–2010 – the Investment Boom, the Jobless Recovery, and the Great Recession. Finally, we consider the outlook for future US economic growth. For this purpose we have adapted the methodology for projecting economic growth originated by Jorgenson, Ho, and Stiroh (2008) and employed for recent projections of economic growth for the US and the world economy by Jorgenson and Vu (2013). We utilize historical data on the sources of US economic growth at the industry level and aggregate over industries to compare the results with projections by Byrne, Oliner, and Sichel (2013) and others summarized by them. The final section of the paper presents our conclusions.