Unemployment and Productivity, Slowdowns and Speed-Ups: Evidence Using Common Shifts

Published in The B.E. Journal of Macroeconomics, 2009, Vol. 9 : Iss. 1 (Topics), Article 39. DOI information: 10.2202/1935-1690.1818.

Keywords: productivity slowdown, growth, NAIRU level, common shifts

Download manuscript version January 2009 (PDF)

The Python/Numpy code for the co-breaking analysis is in the file cobreakprototype_web.py, which has a docstring at the top with explanations. To use it you also need the auxiliary file helpers.py and put it next to the other one, meaning in the same directory/folder.

Abstract: We investigate the controversial issue whether unemployment is related to productivity growth in the long run, using U.S. data in a framework of infrequent mean shifts. Univariate tests find (endogenously dated) shifts in 1974, 1986, and 1996. System co-breaking techniques indicate that the shifts are common features, and the implied long-run link between the two variables is negative. Therefore the secular decline of unemployment since the mid 1990's indeed seems related to higher average productivity growth. The initial and final regimes are essentially equal, which would be compatible with explanations of the productivity slowdown that point to historical learning costs of information technology adoption.

(Latest update: October 2017)