Department of Economics and Economica public lecture Understanding the Stagnation of Modern Economies
Professor Robert Hall Robert and Carole McNeill Senior Fellow, Hoover Institution Professor of Economics, Stanford University
Professor Francesco Caselli Norman Sosnow Professor of Economics, LSE Chair, LSE
Hashtag for Twitter users: #LSEPhillips Understanding the Stagnation of Modern Economies
Robert E. Hall Hoover Institution and Department of Economics Stanford University
The Phillips Lecture London School of Economics 28 April 2016
·
1 Allocation of 10.0 percentage points of shortfall in real GDP, 2010
4 Excess unemployment 3.3
Shrunken labor 3 1.3 force Shrunken labor force
2 Reduced productivity growth 3.1
1 Depleted capital stock 2.3
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
2 Allocation of 15.4 percentage points of shortfall in real GDP, 2015
4 0.5 Excess unemployment
Shrunken labor 3 3.3 force Shrunken labor force
2 Reduced productivity growth 6.6
1 Depleted capital stock 5.1
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
3 Topic 1: Output
21
20
19
Trillions of 2009 dollars 18 Detrended real GDP 17
16
15 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
4 Topic 2: Unemployment
12
10
8
6
Percent of labor force 4
2
0 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
5 Unemployment and productivity
12 1.1
Output per worker 10 (inverse, right scale) 1.0
8 1.0
6 0.9
4 0.9 Unemployment rate (left scale) 2 0.8 Reciptorcal of index of real output per worker Percent of population working or looking for work
0 0.8 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
6 Unemployment and the stock market
12 3.5
3.0 10
2.5 8 Unemployment rate (left scale) 2.0 6
1.5 market
4 1.0 Stock market (inverse, right 2 scale) 0.5 Reciptorcal of index of real value of the stock Percent of population working or looking for work
0 0.0 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
7 Direct Effect of Unemployment
21
20
19
18
17
16 Real GDP Adjusted for direct effect of unemployment Detrended Real GDP, trillions of 2009 dollars
15 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
8 Topic 3: Shrinkage of the labor force
90
Men 80
70 Percent of population working or looking for work 60 Percent
50 Women
40
30 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
9 Role of family income
from Hall and Petrosky-Nadeau (2016) 1st 2nd 3rd 4th Total
1.5% 1st (poorest)
0.5% 0.7 2nd 0.3
-0.5% 3rd
-1.5% -1.5 -2.0 4th (richest) -2.5% Total -2.6 10 -3.5% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Changes in weekly hours of time use, 2003 to 2013, people 15 and older
Personal Household Market Education Leisure Other care work work
Men 1.3 0.1 -2.5 0.2 1.3 -0.4
Women 1.6 -0.7 -0.8 -0.1 0.8 -0.8
11 Topic 4: Total Factor Productivity
1.30
1.25
1.20
1.15
1.10
1.05 Index 1.00 Detrended index of output per unit of Input 0.95
0.90
0.85
0.80 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
12 Declining IP investment
3.1
2.6
2.1 Index 1.6 Detrended Index of investment in intellectual property including R&D 1.1
0.6 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
13 Technology diffusion is sensitive to
Figure 4: Diffusionmacro Speed for 3 Internet conditions Technologies in the UK, 2004-2013
from Anzoategui et al.
1 Diffusion Speed for 3 Internet Technologies in UK
0.8
0.6
0.4
0.2
0
-0.2
-0.4
-0.6
-0.8 2004 2005 2006 2008 2009 2010 2012
14 Source: Eurostat; see footnote6 for details of calculations. Shaded areas are UK recession dates as dated by UK ONS.
10 Topic 5: Capital Depletion
1.25
1.20
1.15
1.10
1.05
Index 1.00
0.95 Detrended index of busines capital 0.90
0.85
0.80 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
15 Business Earnings as a Ratio to the Value of Capital
0.35
0.30
0.25
0.20
0.15
0.10
Ratio of capital earnings to value of capital 0.05
0.00 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
16 Allocation of 15.4 percentage points of shortfall in real GDP, 2015
4 0.5 Excess unemployment
Shrunken labor 3 3.3 force Shrunken labor force
2 Reduced productivity growth 6.6
1 Depleted capital stock 5.1
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
17 Topic 6: The Lower Bound on the Nominal Interest Rate
4.5
4.0
3.5
3.0
2.5
2.0
Percent per year Short‐term future interest rate 1.5 implied by yields on longer‐term 1.0 treasury bonds
0.5
0.0 2016 2020 2024 2028 2032 2036 2040 2044
18 Monetary policy has much less scope for stimulus
18
16 Federal Reserve Policy 14 Interest Rate 12
10
8 Percent per year 6
4
2
0 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 2015
19 Sources
I Diego Anzoategui, Diego Comin, Mark Gertler, and Joseba Martinez, “Endogenous Technology Adoption and R&D as Sources of Business Cycle Persistence”, February 2016
I Robert Hall, “High Discounts and High Unemployment”, “Understanding the Decline in the Safe Real Interest Rate”, “Macroeconomics of Persistent Slumps” (chapter for new Handbook of Macroeconomics)
I Robert Hall and Nicolas Petrosky-Nadeau, “Changes in Labor Participation and Household Income”, FRBSF Economic Letter 2016-02, February 2016 ·
20 Department of Economics and Economica public lecture Understanding the Stagnation of Modern Economies
Professor Robert Hall Robert and Carole McNeill Senior Fellow, Hoover Institution Professor of Economics, Stanford University
Professor Francesco Caselli Norman Sosnow Professor of Economics, LSE Chair, LSE
Hashtag for Twitter users: #LSEPhillips