Ian Goldin, Pantelis Koutroumpis, François Lafond, Nils Rochowicz and Julian WinklerView Report
Reconciling Rapid Technological Change and Stagnating Productivity
Productivity growth is an essential component of economic growth and development. The recent slowdown in productivity growth in leading economies has been described as a puzzle or paradox, leading to extensive research into possible explanations. In this paper, we review the relevant literature and identify the reasons underpinning the slowdown, which appear orthogonal to recent technological advances. Our work indicates that mismeasurement, the increasing dependence on intangible assets, the lack of investment in new technologies for the majority of firms and imperfect competition explain much of this slowdown. In this first comprehensive review of the dozens of explanations for the paradox, we describe the economic and institutional mechanisms that contribute to stagnating productivity, weigh their significance, and consider possible policy implications.