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Declining American Economic Growth Despite ongoing Innovation
This paper discusses the causes of the decline in the rate of economic growth in the US despite the advancement in technology. The study has considered various time phases while looking at economic growth in the US. The slowdown has been divided into two phases. The first phase is from 1920 to 2006 and the second phase is after 2006. The reasons for slowing growth have been studied as either being related to productivity growth or not. There have been different reasons identified by the author for the slowdown in growth. The demographic reasons include the changes in fertility, mortality, expected life span and immigration. In the demographic aspects, the main contributor to the slowdown was the decrease in growth of work hours which was in turn caused by the decline in population growth. The slower population growth reduced the inflow of new workers in the workplace. The increased life expectancy will mean that the population is aging and more people are dependent on the young working people. The decrease in the population growth is a combination of a decrease in fertility, decrease in mortality and changes in immigration. The author has pointed out a socioeconomic decay where the fertility has declined along with the rate of mortality. The participation of the labor force has declined because the number of hours worked by each person has declined along with the decline in population growth.
One of the economic reasons related to slow economic growth is the increased inequality in income growth. The overall growth in income is not equally distributed and the top 1 % of the population have got the biggest chunk of the increase. The bottom 90% of the population had a decrease in the real income as compared to an increase in the real income of the overall population. In this regard, there have been serious flaws in the methods used to compare the incomes of various groups.
The productivity based reason for slower growth is education. There has been a considerable decline in the productivity of labor over the period under consideration. Educational attainment is a considerable source of higher productivity but after a given point in time, the educational aspect is saturated. The percentage of the population that completed high school declined sharply after the 1980s. In order to measure the growth in productivity, the productivity index is used. The author should have used technical education instead of simple traditional education. In fact, the most appropriate consideration here would have been the skill-based variable. This is because the author has continuously reverted to the industrial revolutions.
There has been a considerable decrease in the productivity of all the developed economies of the world during the period under consideration. The productivity pattern for the US economy has shown a variable pattern. The increase in productivity was mainly attributable to the major inventions from the second industrial revolution. There was a considerable impact of the digital revolution on all the developed economies but this impact was different in the US as compared to other developed economies. The difference lies in the time span, in case of the US this impact is concentrated within a shorter time span while in case of other developed economies this impact was notable over a longer course of time. After 2006, the implementation of the digital processes in the business activities matured and slowed down. There was a considerable difference between the increases in productivity after the second and third industrial revolutions. The increase in productivity after the second industrial revolution lasted around 50 years as opposed to the increase in productivity after the third industrial revolution that lasted only 10 years.
This is a descriptive study that has used secondary data from various sources to describe trends in economic growth in the US. The growth has been studied within the phases attributable to the second and third industrial revolutions. Various social, demographic and economic variables have been studied to analyze the growth patterns in the economy. The authors have concluded that people lost their jobs due to globalization and automation. This trend coupled with the increasing inequality has resulted in people not seeing the future positively. The education attainment has no longer been considered a source of increased productivity. College education has become too costly for the masses.
Importance of the questions
The discussion regarding economic growth is an important aspect for the country as well as the masses. There are many factors that have been given in the paper. The most important ones are the second and third industrial revolutions. The authors have used the education variable to have an impact on the slowdown of productivity. In my opinion, technical education should have been used as a variable. The reason is that high school education is not directly related to the workforce output but technical education is. The paper is based on some secondary data and it has deduced some analysis from it. No proper statistical methods have been used by the authors. There is a mix of demographic, social and economic variables considered while studying the decline in economic growth. This means that no single dimension has been completely covered in this paper. The author has compared various parts of the world in terms of the variables discussed. This study ignores the most important part of the world namely Asia. This is because the demographic factors studied in this paper could best be studied in this part of the world.
Concerns with this paper
The major concerns with this paper relate to the usage of variables and data. The secondary data has been used by the author which relate to very further past. The variables that have been used related to different dimensions or categories. Thus, there has not been any convincing conclusion as to what causes the most decline in economic growth. The better way would have been to use the regression analysis on some fresh data and analyze those variables that affect the economic growth most significantly. Especially the education variable should have been changed with technical education. The regions selected have huge areas and lower populations, it could have been better if the author had chosen South East Asia as one of the regions. This would have allowed him to analyze the impact of changes in population on growth properly. Similarly, productivity is affected by many factors other than education. These factors include both on the job as well as of the job factors. The author has ignored these factors. The author has given some alternative aspects of the slowdown in economic growth. Investment in the business capital stock is one of them. Again, there are several considerations regarding this aspect. The ease with which the entrepreneurs can get loans is one of them. If the loans are easily available, the investment in capital stocks will increase and vice versa. Again, some regression model would have been more useful here. A comprehensive regression model would have taken into account the mismeasurement aspect of the error term. The paper shows some complex relationships between the variables considered. He has named such relationship as reverse causation. This sort of relationships can be assessed using statistical models.
BIBLIOGRAPHY Gordon, Robert J. "Declining American Economic Growth despite ongoing innovation." Explorations in Economic History (2018): 1-12. Article.
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