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Lack of allocative efficiency improvement explains much of the slowdown

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Research area:Economics, Econometrics and FinanceEconomic Growth and ProductivityEconomics and Econometrics

What the study found

The study finds that about two-thirds of the US productivity slowdown in the 1970s and 2000s can be explained by the lack of improvement in allocative efficiency, meaning how well resources are distributed across sectors. It also reports that higher sector-level volatility is associated with weaker allocative efficiency.

Why the authors say this matters

The authors conclude that allocative efficiency is an important part of understanding the productivity slowdown in the US. The findings indicate that changes in how resources move across sectors may help explain slower aggregate productivity growth.

What the researchers tested

The researchers studied the contribution of cross-sector allocative efficiency to the US productivity slowdown during the 1970s and 2000s. They extended the framework of Oberfield (2013) to derive sufficient statistics for allocative efficiency and to decompose aggregate productivity growth in a multisector economy.

What worked and what didn't

Their analysis suggests that allocative efficiency helps explain the slowdown, with roughly two-thirds of the decline accounted for by the lack of improvement in this area. The data also show an association between increased sector-level volatility and deterioration in allocative efficiency.

What to keep in mind

The abstract does not describe limitations, sample details, or the specific sectors studied. It also reports an association between volatility and allocative efficiency, but does not state a causal effect.

Key points

  • About two-thirds of the US productivity slowdown is linked to lack of improvement in allocative efficiency.
  • The study examines cross-sector allocative efficiency in the 1970s and 2000s.
  • The authors extend Oberfield (2013) to decompose aggregate productivity growth in a multisector economy.
  • Higher sector-level volatility is associated with worse allocative efficiency.
  • The abstract does not describe limitations or sample specifics.

Disclosure

Research title:
Lack of allocative efficiency improvement explains much of the slowdown
Authors:
Lin Shao, Rongsheng Tang
Institutions:
Economic Research Institute, University of North Carolina at Greensboro
Publication date:
2026-02-01
DOI:
10.1111/caje.70046
OpenAlex record:
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AI provenance: This post was generated by gpt-5.4-mini (OpenAI). The original authors did not write or review this post.