. 5 an important element of the analysis of this and other periods is the decomposition of output per hour into its underlying sources, including the contributions of multifactor productivity, capital deepening, and labor quality. in this regard, kendrick ’ s decomposition suggests that labor productivity growth in the late 1800s was fueled importantly by capital investment. 6 during the next three decades, from 1890 to 1917, the growth rate of labor productivity slowed to an average pace of only 1 - 1 / 2 percent per year, with modest rates of growth both in the capital stock and in multifactor productivity. the united states then enjoyed a relatively brief spurt in productivity until about 1927, with labor productivity rising about 3 - 3 / 4 percent per year and multifactor productivity up around 2 3 / 4 percent per year. this productivity boom was led by the expansion of the automobile industry and robust productivity gains in manufacturing more generally. productivity growth was markedly slower through the great depression and world war ii, largely reflecting a lack of capital see kendrick ( 1961 ) and kuznets ( 1946 ). see, for example, gallman ( 1966 ) and rhode ( 2002 ). this estimate of productivity growth is the change from kendrick ’ s estimate of the average level of productivity in the 1870s to the level of productivity in 1890. decompositions of productivity growth before 1948 are the subject of some debate, and thus estimates of multifactor productivity for these earlier periods should probably be viewed as less reliable than are the estimates of labor productivity. deepening. multifactor productivity rose at a relatively solid pace - albeit not as fast as earlier in the century - despite the weak economy during much of that period. productivity growth since world war ii is more familiar to us and is based on more reliable data - those constructed as part of the multifactor productivity program at the bls. according to these data, labor productivity rose at an annual rate of close to 3 percent from 1948 to 1973 - a period sometimes referred to as the golden age of productivity growth. during this period, productivity accelerated across a broad range of industries, and both capital deepening and gains in multifactor productivity contributed to the strong pace of growth. the productivity slowdown of the 1970s and 1980s is also well known to us, and its possible causes have been the subject of much research. labor productivity growth slowed to an average pace of 1. 4 percent per year over this period, while multifactor productivity growth fell to a pace of 0. 4

percent, the slowest pace of any of the periods shown on the table. finally, labor productivity growth has averaged about 3 percent at an annual rate since 1995, with higher rates of both capital deepening and multifactor productivity growth contributing to the pickup. sources of past productivity booms : technological change although the productivity booms of the past century and a quarter obviously differed in many respects, each episode can readily be associated with the introduction of one or more new technologies. the boom after the civil war, for instance, appears to have had its genesis in technological improvements that increased the flexibility of production and reduced transportation costs, which allowed firms to take advantage of economies of scale in production and distribution. in particular, the widespread introduction of steam engines and machinery driven by new sources of energy enabled firms to move away from sources of waterpower and closer to areas where inputs including labor and raw materials - were more readily available. the midwest - where sources of waterpower were less abundant but coal was more abundant - benefited greatly from this development, and indeed within a few decades became known as the “ industrial heartland ” of the united states. this regional shift in economic activity is illustrated by a sharp rise in the share of personal income generated in the midwest between 1840 and 1880 ( from 20 percent to 35 percent ), and the commensurate decline in the share of income generated in the northeast ( from 43 percent to 31 percent ). 7 the increase in the importance of railroad transportation also helped raise productivity growth in the second half of the nineteenth century. 8 improved methods of steel production - notably, the bessemer process, and later, siemens ’ s open hearth method - enabled railroads to lay longer - lasting steel track rather than iron track. and the growth of telegraphy enabled railroads to better coordinate the movement of trains over a wider area. as a result, railroads expanded their geographic coverage significantly after the civil war : from 1860 to 1890, the number of main track miles operated by railroad companies more than quintupled, from 31, 000 miles to 167, 000 miles, while the number of freight cars in operation jumped from 185, 000 to more than 1 million. 9 the expansion of the railroads drove transportation costs sharply lower and allowed a significant increase in market size. whereas, in 1830, the transportation of goods from new york to chicago had required three weeks even during the warmer months of the year, by 1870, it could be accomplished in three days any time of the year. 10 in