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Abstract

This paper analyzes the sources of U.S. labor productivity growth in the post-1995 period and presents projections for both output and labor productivity growth for the next decade. Despite the recent downward revisions to U.S. GDP and software investment, we show that information technology (IT) played a substantial role in the U.S. productivity revival. We then outline a methodology for projecting trend output and productivity growth. Our base-case projection puts the rate of trend productivity growth at 2.21% per year over the next decade with a range of 1.33 - 2.92%, reflecting fundamental uncertainties about the rate of technological progress in IT-production and investment patterns. Our central projection is only slightly below the average growth rate of 2.36% during the 1995-2000 period.

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