Th e Enigma of US Productivity Slowdown: A Theoretical Analysis


  • Abdul Ghafoor Awan Institute of Southern Punjab
  • Rana Ejaz Ali Khan Islamia University of Bahawalpur



Productivity, Patent, R&D, Technological progress, Output


Introduction: The economy of the United States is the number one economy of the world on the basis of its GDP size. Many economies of the world depend upon the working upon it. However, US economy has been facing the phenomena of labour productivity slowdown since 1973. The productivity grow was witnessed during 1990s decade due to revolution of information technology but it was proved transitory. To investigate this phenomenon the economists have been actively working and using different theoretical and empirical approaches. But it is still an enigma and its real cause has so far not been detected. The objective of the Study: The objective of this research study is to investigate why US economy has been facing productivity growth slowdown since long, what are its causes and what is its possible solution?. Methodology: The author has used qualitative research approach in which real economy sector and technology economy sector have been studied on the basis of secondary data collected from OECD, IMF, World Bank,etc. The individual share of these sectors in the US GDP has been determined to analyze their effects on productivity growth. The author has also compared goods and services sectors and their contribution into the US GDP. Findings: The results of study shows that no breakthrough or major innovation has occurred in the major sector of US economy. Information technology is a small sector and growth in this sector during 1990s has not brought any signifi cant impact on the US economy. The evidence shows that quality of patents is falling despite increasing number of researchers during the period of 1990-2010 and it refl ects diminishing return on R&D investment in the technology sector. The ratio of input/output is 40/100 which is totally against the concept of constant return to scale.


Download data is not yet available.

Author Biographies

Abdul Ghafoor Awan, Institute of Southern Punjab

Dean, Faculty of Management and Social Sciences, Institute of Southern Punjab, Pakistan

Rana Ejaz Ali Khan, Islamia University of Bahawalpur

Chairman, Department of Economics, Islamia University of Bahawalpur, Pakistan


Brynjolfsson, E., and L.M. Hitt. (1995). "Information Technology as a Factor of Production: The Role of Differences among Firms." Economics of Innovation and New Technology. Special issue on information technology and productivity paradox. 3(4): 183–200. DOI:

Bureau of Labour Statistics (2012) “US Labour Productivity Report,2012”.

Gordon, Robber J (2012) “Macroeconomics”, New Delhi: PHL Learning Private Ltd.

Gordon, Robert. J (1999) "The Aftermath of the 1992 ERM Breakup: Was There a Macroeconomic Free Lunch?," NBER Working Papers6964, National Bureau of Economic Research, Inc. DOI:

Gordon. Rover J (2000) “Does the New Economy Measure up to the Great invention of the past?” Journal of Economic Oerspectives, Vol.14, pp.49-74. DOI:

Griliches, Zvi (19947 “The Productivity Slowdown: Is a growing unmeasurable sector the culprits” Review of Economics and Statistics, V.79, Issue 3 pp 371,August, 1997. DOI:

Magdoff, Harry & Paul M. Sweezy (1977) “The End of Prosperity: The American Economy in the 1970s”, New York, Monthly Review Press, U.S.A.

Nordhaus, William D. (2204) “Schumpeterian Profits in the American Economy: Theory and Measurement.”, NBER Working Paper No. 10433,Issued in April 2004.

OECD Report (2011) “Education at a Glance 2011: OECD Indicators”

OECD Report (2012) “Economic Outlook”, September,2012.

OECD Report (2012). “OECD Guidelines for Multinational Enterprises”, Annual Report, 2012.

OECD Report (2013) “Composite Leading Indicators (CLIs”, OECD, August 2013.The Sichel, Daniel E. (1997) “Computer Revolution : An Economic Perspective” Brookings Institution Press.

Weil, David N (2011) “Macroeconomics:, Pearson Education Inc, Addison-Wesley, U.S.A.

Wolf, E.N. (1991). “Capital Formation and Productivity Convergence over the Long-Term”, American Economic Review, Vol 81, pp 565-579.





How to Cite

Awan, A. G. ., & Khan, R. E. A. . (2014). Th e Enigma of US Productivity Slowdown: A Theoretical Analysis. American Journal of Trade and Policy, 1(1), 7–15.



Research Articles