Typically after a recession, the United States economy experiences a spike in growth. Although the unemployment rate has returned to pre-recession levels, the economy’s growth after the 2008 recession has been slow and unimpressive, according to a working paper co-authored by a Stanford economist.
Robert Hall, who is the Robert and Carole McNeil Professor of Economics and senior fellow at the Hoover Institution, was one of four leading economists that explored the slow economic growth since the Great Recession in the National Bureau of Economic Research paper, “The Disappointed Recovery of Output after 2009.”
The paper identified two major factors for this anomaly: low productivity growth and a decline in labor force. According to the paper, these factors were present before the recession, preventing the economy from experiencing faster growth after.
Hall told Stanford News that between one-half to two-thirds of the labor force shrinkage was because of the changing demographic mix of the working-age population. He also added that rising dependence on disability benefits was a small factor in the slow growth.
As for low productivity growth, Hall’s research showed a slowdown in total factor productivity occurring around 2006. Hall told Stanford News that he believes this slowdown is the result of a special, unsustainable period of productivity growth that occurred during the second half of the 1990s and the first half of the 2000s, possibly due to the adoption of information technology.
While some have argued that government regulations and weak investment were additional factors that contributed to the slow economic growth, Hall’s findings did not confirm these theories.
“We worked on trying to quantify the changes in regulations and their effects on productivity, but did not confirm much of a connection,” Hall said to Stanford News. “We showed that weak investment did not appear to be an independent force explaining weak growth, but rather a response to the adverse forces of low productivity growth and shrinking labor force.”
Although Hall said the paper did not focus on economic initiatives proposed by the Trump administration, he believes federal reforms should have a different focus.
“My personal belief is that tax reform and regulatory reform, such as rolling back the tide of occupational licensing restrictions, would have payoffs at least in the intermediate future,” Hall told Stanford News. “Our biggest need is to improve K-12 education, but the scope of federal reform in that area is small.”
Contact Amy Guo at acguo29 ‘at’ gmail.com