No conclusive answers to the question of why productivity growth slowed in the early 1970s, and has remained stubbornly slow since, have been provided by academic economists. But the Boskin Commission's findings of bias and measurement error in the CPI suggest that mismeasurement may also account for much, if not all, of the reported productivity slowdown. The earliest attempts to explain the productivity slowdown attributed it mainly to the oil crises of the 1970s, which raised the real price of energy by about 45 percent between 1973 and 1974, and by nearly 300 percent in 1980. As Figure 1 shows, the timing of the productivity slowdown seems to coincide nicely with this energy price story. Thus, suddenly high and rising energy prices may have knocked the economy off of its post-war productivity growth path, but they cannot explain why slower growth has persisted.
Alternative explanations abound.
This story characterizes the productivity slowdown as simply a reflection of the drying up of profitable inventions. Research by Harvard economist Zvi Griliches finds no convincing evidence that such weakening occurred. So, the puzzle continues. An Early Revisionist Story Michael Darby of UCLA provides some of the earliest evidence that contradicts the productivity slowdown. The main thrust of his argument is that failure to adjust for differences in labor quality over time, as measured by age, sex, education, and whether the worker in native or foreign-born, will distort measures of labor productivity.