Working Papers

2023-07 | February 2023


The Productivity Slowdown in Advanced Economies: Common Shocks or Common Trends?

Author(s): John Fernald, Robert Inklaar, and Dimitrije Ruzic

This paper reviews advanced-economy productivity developments in recent decades. We focus primarily on the facts about, and explanations for, the mid-2000s labor-productivity slowdown in large European countries and the United States. Slower total factor productivity growth was the proximate cause of the slowdown. This conclusion is robust to measurement challenges including the role of intangible assets, rankings of productivity levels, and data revisions. We contrast two main narratives for the stagnating productivity frontier: The shock of the Global Financial Crisis; and a common slowdown in productivity trends. Distinguishing these two empirically is hard, but the pre-recession timing of the U.S. slowdown suggests an important role for the common-trend explanation. We also discuss the unusual pattern of productivity growth since the start of the Covid-19 pandemic. Although it is early, there is little evidence so far that the large pandemic shock has changed the slow pre-pandemic trajectory of productivity growth.

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Article Citation

Fernald, John, Robert Inklaar, and Dimitrije Ruzic. 2023. "The Productivity Slowdown in Advanced Economies: Common Shocks or Common Trends?," Federal Reserve Bank of San Francisco Working Paper 2023-07. Available at