Most Popular Books by Robert J Gordon

Murder, the high seas, deception, smuggling and success, in the shipping world, combine to tell the tale of Sean McChesney''s fall and rise.

Secular stagnation refers not to the literal stagnation, i.e., stopping of economic growth but rather to the slowing of U.S. potential real GDP growth to half or less of its historical pace. The retardation of potential real GDP growth matters both because of its direct impact on the standard of living and also because of its indirect effect on net investment, which in turn feeds back to slower productivity growth. During the decade ending in 2014:Q4, U.S. real GDP grew at only 1.55% per year, almost exactly half the growth rate of 3.12% per year achieved during the previous three decades, 1974-2004, and an even smaller fraction of the 3.62% per year performance of 1929-1974. This paper predicts that slow growth of around 1.5% per year will continue over the next decade or two. Part of the slowdown in output growth is due to a decline in the growth rate of the working age population. A second reason is a shift in worker hours per capita from an increase due to the entry of women into the labor force during 1965-1995 to a future decrease due primarily to the retirement of the baby-boom generation. A third reason is an ongoing slowdown in the growth rate of output per hour, from 1.72% per year during 1974-2004 to 1.10% per year in 2004-2014 and to an even slower 0.55% per year during 2009-2014. The sources of the decline in productivity growth combine diminishing returns that have set in following the ICT revolution of the 1996-2004 "dot.com" era with a decline in business dynamism, as the entry of new business firms has steadily declined over the past three decades relative to the exit of existing firms. Moore''s Law describing the steady exponential increase in the number of transistors on a chip became obsolete a decade ago. The historic rise of educational attainment has slowed to a crawl, and the declining share of children growing up in two-parent families may lead to a future decrease in high school completion and an increase in criminal activity among youth. While future productivity growth will be slower than before 2004, it will still continue as in the past decade at a rate slightly in excess of one% per year.

Looks at the magnitude of ICT investment''s contribution to US productivity growth.

Macroeconomics is widely praised for its ability to present theory as a way of evaluating key macro questions, such as why some countries are rich and others are poor. Students have a natural interest in what is happening today and what will happen in the near future. Macroeconomics capitalizes on their interest by beginning with business cycles and monetary-fiscal policy in both closed and open economy. After that, Gordon presents a unique dynamic analysis of demand and supply shocks as causes of inflation and unemployment, followed by a dual approach to economic growth in which theory and.

This paper investigates the sources of the widely noticed reduction in the volatility of American business cycles since the mid 1980s. Our analysis of reduced volatility emphasizes the sharp decline in the standard deviation of changes in real GDP, of the output gap, and of the inflation rate. The primary results of the paper are based on a small three-equation macro model that includes equations for the inflation rate, the nominal Federal Funds rate, and the change in the output gap. The development and analysis of the model goes beyond the previous literature in two directions. First, instead of quantifying the role of shocks-in-general, it decomposes the effect of shocks between a specific set of supply shock variables in the model''s inflation equation, and the error term in the output gap equation that is interpreted as representing "IS" shifts or "demand shocks". It concludes that the reduced variance of shocks was the dominant source of reduced business-cycle volatility. Supply shocks accounted for 80 percent of the volatility of inflation before 1984 and demand shocks the remainder. The high level of output volatility before 1984 is accounted for roughly two-thirds by the output errors (demand shocks) and the remainder by supply shocks. The output errors are tied to the paper''s initial decomposition of the demand side of the economy, which concludes that three sectors - residential and inventory investment and Federal government spending, account for 50 percent in the reduction in the average standard deviation of real GDP when the 1950-83 and 1984-2004 intervals are compared. The second innovation in this paper is to reinterpret the role of changes in Fed monetary policy. Previous research on Taylor rule reaction functions identifies a shift after 1979 in the Volcker era toward inflation fighting with no concern about output, and then a shift in the Greenspan era to a combination of inflation fighting along with strong countercyclical responses t.

Abstract: The statistical trend for growth in total economy LP ranged from 2.75 percent in early 1962 down to 1.25 percent in late 1979 and recovered to 2.45 percent in 2002. Our results on productivity trends identify a problem in the interpretation of the 2008-09 recession and conclude that at present statistical trends cannot be extended past 2007

In the late 1960s the stable negatively sloped Phillips Curve (PC) was overturned by the Friedman-Phelps natural rate model. Their PC was vertical in the long run at the natural unemployment rate, and their short-run curve shifted up whenever unemployment was pushed below the natural rate. This paper criticizes the underlying assumption of the Friedman-Phelps approach that the labor market continuously clears and that changes in unemployment down or up occur only in response to "fooling" of workers, firms, or both. A preferable and resolutely Keynesian approach explains quantity rationing by inertia in price and wage setting. The positive correlation of inflation and unemployment in the 1970s and again in the 1990s is explained by joining the negatively sloped Phillips Curve with a positively sloped dynamic demand curve. For any given growth of nominal GDP, higher inflation caused by adverse supply shocks implies slower real GDP growth and higher unemployment. This "triangle" model based on inflation inertia, demand, and supply worked well to explain why inflation and unemployment were both positively and negatively correlated between the 1960s and 1990s, but in the past decade the slope of the short-run Phillips Curve has flattened as inflation exhibited a muted response to high unemployment in 2009-13 and low unemployment in 2016-2018. It remains to be seen whether a continuation of low unemployment will cause a modest and fixed extra amount of inflation, thus reviving the stable Phillips curve of the early 1960s, or whether inflation will continuously accelerate as Friedman and Phelps would have predicted.

By far the most widely noted and puzzling aspect of the current economic recovery is its failure to create jobs. While payroll employment in seven previous recessions increased a full 7 percent in the first twenty-three months following the NBER business cycle trough, such employment increased by only 0.8 percent - just over one-tenth as much - from March 1991 to March 1993. Part of the explanation of negligible job growth lies in the recovery''s relatively slow pace of output growth, which has been little more than one-third the usual postwar pace. The remaining part of the job puzzle stems from the ebullient performance of productivity - that is, output per hour in the nonfarm business sector - which registered a growth rate of 3.2 percent in the four quarters ending in 1992:4, the most rapid rate recorded in any similar period for more than sixteen years. The share of output growth accounted for by productivity growth in the current recovery is 112 percent, far exceeding the 47 percent average of the previous postwar recoveries at the same stage. For any given pace of output growth, more rapid productivity growth by definition implies less rapid growth in labor input. This suggests that the recent revival in productivity growth may be the key to understanding the puzzling absence of job creation in the recovery. Productivity-led growth is nothing but good news. In the two decades ending in mid-1992, the nonfarm business sector registered an average annual productivity growth rate of less than 1 percent: 0.85 percent, to be exact. Imagine the benefits to the economy if the recent good news on productivity were to imply, as some have suggested, a doubling in productivity growth to a rate of 1.7 percent over the next decade. For any given path of labor input, nonfarm private business output in the year 2003 would be almost 9 percent larger - some $450 billion more - allowing that much more private and/or public spending. Productivity-led growth does not imply a jobless recovery in anything but the shortest run. Instead, any beneficial shock to productivity growth sets the stage for lower inflation that enables policy makers to stimulate output growth sufficiently to create the same number of jobs that would have occurred in the absence of the shock. If the jobless character of the 1991-93 recovery indeed has been caused by a benign productivity shock, then its jobless character implies that there has been too little stimulus to output growth, not that a productivity surge must necessarily rob the nation of jobs.

After fifty years of catching up to the United States level of productivity, since 1995 Europe has been falling behind. The growth rate in output per hour over 1995-2003 in Europe was just half that in the United States, and this annual growth shortfall caused the level of European productivity to fall back from 94 percent of the United States level to 85 percent. Fully one-fifth of the European catch-up (from 44 to 94 percent) over the previous half-century has been lost over the period since 1995. Disaggregated studies of industrial sectors suggest that the main difference between Europe and the United States is in ICT-using industries like wholesale and retail trade and in securities trading. The contrast in retailing calls attention to regulatory barriers and land-use regulations in Europe that inhibit the development of the big box retailing formats that have created many of the productivity gains in the United States. For many decades, the United States and Europe have gone in opposite directions in the public policies relevant for metropolitan growth. The United States has promoted highly dispersed low-density metropolitan areas through its policies of building intra-urban highways, starving public transit, providing tax subsidies to home ownership, and allowing local governments to maintain low density by maintaining minimum residential lot sizes. Europeans have chosen different policies that encourage high-density residential living and retail precincts in the central city while inhibiting the exploitation of greenfield suburban and exurban sites suitable for modern big box retail developments. The middle part of the paper draws on recent writing by Phelps: economic dynamism is promoted by policies that promote competition and flexible equity finance and is retarded by corporatist institutions designed to protect incumbent producers and inhibit new entry. European cultural attributes inhibit the development of ambition and independence by teenagers and young adults, in contrast to the

This paper provides a comprehensive survey of seven aspects of rising inequality that are usually discussed separately: changes in labor''s share of income; inequality at the bottom of the income distribution, including labor mobility; skill-biased technical change; inequality among high incomes; consumption inequality; geographical inequality; and international differences in the income distribution, particularly at the top. We conclude that changes in labor''s share play no role in rising inequality of labor income; by one measure labor''s income share was almost the same in 2007 as in 1950. Within the bottom 90 percent as documented by CPS data, movements in the 50-10 ratio are consistent with a role of decreased union density for men and of a decrease in the real minimum wage for women, particularly in 1980-86. There is little evidence on the effects of imports, and an ambiguous literature on immigration which implies a small overall impact on the wages of the average native American, a significant downward effect on high-school dropouts, and potentially a large impact on previous immigrants working in occupations in which immigrants specialize.The literature on skill-biased technical change (SBTC) has been valuably enriched by a finer grid of skills, switching from a two-dimension to a three- or five-dimensional breakdown of skills. We endorse the three-way quot;polarizationquot; hypothesis that seems a plausible way of explaining differentials in wage changes and also in outsourcing.To explain increased skewness at the top, we introduce a three-way distinction between market-driven superstars where audience magnification allows a performance to reach one or ten million people, a second market-driven segment consisting of occupations like lawyers and investment bankers, and a third segment consisting of top corporate officers. Our review of the CEO debate places equal emphasis on the market in showering capital gains through stock options and an arbitrary management power hypothesis based on numerous non-market aspects of executive pay.Data on consumption inequality are too fragile to reach firm conclusions. We introduce two new issues, disparities in the growth of price indexes and also of life expectancy between the rich and the poor. We conclude with a perspective on international differences that blends institutional and market-driven explanations.

The dismal decade of 2010-19 recorded the slowest productivity growth of any decade in U.S. history, only 1.1 percent per year in the business sector. Yet the pandemic appears to have created a resurgence in productivity growth with a 4.1 percent rate achieved in the four quarters of 2020. This paper provides a unified framework that explains productivity growth in both the pre-pandemic and pandemic-era U.S. economy. The key insight is that in their panicked reaction to the collapse of output in the 2008-09 recession, business firms overreacted with "excess layoffs," adjusting hours to the output decline with a far higher elasticity than normal. Our regression analysis, which allows post-recession rehiring that gradually unwinds the excess layoffs, explains why productivity growth was countercyclical in 2009 and why it was so slow in 2010-16 as rehiring boosted hours growth. Post-sample simulations explain why productivity growth was so high in 2020 and why it fell to only 0.6 percent in the five quarters of 2021-22. The paper includes implications for the future long-term evolution of productivity growth in the business sector and total economy. A new data file on quarterly productivity levels and changes for 17 industries provides new perspectives for 2006-22 and particularly for the nine pandemic quarters of 2020-22. Positive pandemic-era productivity growth can be entirely explained by a surge in the performance of work-from-home service industries, while goods industries soared and then slumped, while contact services recorded strongly negative productivity growth throughout 2020-22.

This paper develops the theory of price measurement when quality change is "nonproportional", yielding increases in the user value of a given product in a different proportion than the increase in production cost associated with the quality improvement. The theoretical section demonstrates that "nonproportional" quality change is treated consistently by properly defined input and output price indexes; that both types of indexes should he based on quality adjustments that use the criterion of user value rather than production cost; and that if improvements in energy efficiency are embodied in a good by its manufacturer, the prices of new models should be adjusted for the user value of these cost savings. The proposed approach is applied in a case study of the commercial aircraft industry. In contrast to the official price index for aircraft that rises at a 2.5 percent annual rate between 1957 and 1972,a new index is developed that declines at a 7.1 percent annual rate over the same period. The new index implies that output and productivity in the aircraft industry grew much faster than previously believed between 1957 and1972,while total factor productivity in the airline industry grew much less rapidly. The proposed quality adjustments for individual aircraft types are corroborated by price ratios observed in the used aircraft market.