Why Has Productivity Growth Accelerated in the U.S. While Slowing in Other Countries?
The United States has experienced the fastest acceleration of productivity growth among major industrialized countries since the early 1990s. After lagging behind most of the countries in the G7 between 1990 and 1995, the United States has been the country with the fastest growth in GDP per hour worked in the G7 between 2000 and 2005. Only the United States and Japan had faster productivity growth in the most recent period than they did in the early 1990s, and only the United States has shown consistent acceleration over this time period.
Since all of these countries have, in principle, approximately the same access to information and global markets, why have the other major industrialized countries not been able to post productivity gains as large as those in the United States and Japan? The major advances in this period appear to have come from opportunities that developed from the rapid advancement in information technology. While all developed countries had access to IT capital, the existing economic environment in the United States put it in position to quickly make the most of these opportunities. International openness to investment and trade combined with highly flexible and lightly regulated markets and an environment that fosters innovation appear to be at least part of the answer.