Accounting for U.S. Post-War Economic Growth

Abstract

We apply the Chari et al. (2002Chari et al. ( , 2007 methodology to develop a growth accounting exercise for the u.s. economy during 1954-2017. Unlike them, we focus on perfect foresight models. We obtain three primary findings. First, the efficiency wedges in the entire period accurately account for the evolution of u.s. productivity and labor share. Second, the labor wedge was the main force driving the recovery of output and worked hours per capita in the eighties and nineties as well as after the Great Recession. Finally, if we replace the Cobb-Douglas assumption with a production function, which allows the factor shares to adjust competitively, the forces driving the u.s. Great Recession might not be very different from those in other oecd economies, and the forces driving the 1982 recession in the United States.