Principles of Economics- Mankiw (5th) 528

Principles of Economics- Mankiw (5th) 528 - 546 PA R T N I...

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546 PART NINE THE REAL ECONOMY IN THE LONG RUN Because it has accumulated over so many years, this fall in productivity growth of 1.9 percentage points has had a large effect on incomes. If this slowdown had not occurred, the income of the average American would today be about 60 per- cent higher. The slowdown in economic growth has been one of the most important problems facing economic policymakers. Economists are often asked what caused the slowdown and what can be done to reverse it. Unfortunately, despite much research on these questions, the answers remain elusive. Two facts are well established. First, the slowdown in productivity growth is a worldwide phenomenon. Sometime in the mid-1970s, economic growth slowed not only in the United States but also in other industrial countries, including Canada, France, Germany, Italy, Japan, and the United Kingdom. Although some of these countries have had more rapid growth than the United States, all of them have had slow growth compared to their own past experi- ence. To explain the slowdown in U.S. growth, therefore, it seems necessary to
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