CLICK HERE TO VIEW THE FULL PRESENTATION
Today, there is suggestive evidence that policies during the recession failed to promote labor market adjustment, leading to permanently lower worker hours.
This matters because in the long-run, the growth rate of potential GDP equals the growth rate of employment – that is, worker hours – plus the growth rate of productivity – that is, output per worker-hour – plus some other lesser factors. Thus a slower long-run growth rate of worker hours translates one-for-one into a slower growth rate of potential GDP.
Click here to view the presentation.
