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THE U.S. PRODUCTIVITY SLOWDOWN: A PEAK THROUGH THE STRUCTURAL BREAK WINDOW

Authors

  • Jim Dolmas,

    1. Assistant Professor, Department of Economics, Southern Methodist University, Dallas, Tex.Phone 1–214-768-3806, Fax 1–214-768-1821 E-mail Jdolmas@maiI.smu.edu
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  • Baldev Raj,

    1. Department of Economics, Wilfrid Laurier University, Waterloo, Ontario, Canada, Phone 1–5 19-884-0710ext. 225, Fax 1–519-884-0201 E-mail braj@mach1.wlu.ca
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  • Daniel J. Slottje

    1. Professor, Department of Economics, Southern Methodist University, Dallas, Tex. Phone 1–214-768-3555, Fax 1–214-768-1821 E-mail Dslottje@mail.smu.edu
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    • *Earlier versions of this paper were presented at the Canadian Economics Association Meetings, Montreal, Canada, June 1995, the Australasian Meeting of the Econometric Society, Perth, Australia, July 1996, and the Camp Econometrics Texas, Port Aransas, Texas, USA, February 15–16, 1997. The paper was also presented at the faculty seminars of the Institute of Advanced Studies, Vienna, Austria, McMaster University and University of Windsor, Canada during 1995, and National Council of Applied Research, New Delhi, India, December 26, 1996. We gratefully acknowledge that financial support for this research was received from grants partly funded by Wilfrid Laurier University (WLU) Operating funds, and partly by the SSHRC General Research Grant awarded to WLU. We also acknowledge helpful discussions with Pierre Perron. We have also benefited from comments of the participants at the conferences and faculty seminars, and two referees of this journal. The usual disclaimer for the remaining errors or misinterpretations applies.


Abstract

This paper provides a formal test of the null hypothesis of a unit root in the log-level of labor productivity against the alternative of linear trend stationarity with a one-time structural break in the level and slope of the trend at an a priori unknown date. Using some newly developed time series tests, we show that the log-level of productivity is more accurately modeled as following a deterministic trend with a regime shift rather than as a unit root process. Some implications of the results for detrending and for testing cointegration relationships between productivity and other variables are discussed. (JEL C22. O40)

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