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


Robert Inklaar

Dimitrije Ruzic

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2023-07 | February 1, 2023

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.

Article Citation

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

About the Author
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John G. Fernald is a senior research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco, and a professor of economics at INSEAD. Learn more about John G. Fernald