Why Has Productivity Growth Declined? Productivity and Public Investment

by Alicia H. Munnell
January/Februrary 1990

The decline in United States productivity has been widely identified as one of the major economic problems facing the nation. This concern is understandable; productivity growth is the major determinant of the future standard of living. Economists have gone to great lengths to try to identify the reasons for the slowdown, and David Aschauer recently introduced the notion that the stock of public infrastructure, as well as the stock of private capital, may be a key to explaining changes in output from the private sector.

This study builds upon Aschauer’s insight and explores whether changes in the amount of public capital, combined with the growth of private capital and labor, can explain most of the slowdown. The author concludes that the main causes of the productivity slowdown could be behind us, as long as public infrastructure receives badly needed attention.

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