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How fast can we grow?

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  • Stephen K. McNees

Abstract

Nearly thirty years ago, Arthur Okun posed the question, \"How much output can the economy produce under conditions of full employment?\" He offered a \"simple and direct\" answer that now, with the benefit of hindsight, seems outmoded and inadequate. This article argues that a minor modification of Okuns procedure based on demographics can adequately account for changes in the potential growth rate over the last 35 years and provide an idea of what to expect in the next ten years. Specifically, it is suggested that changes in the composition and rate of growth of the working-age population can account for the low rate of growth of potential GNP in the 1980s as well as suggest that it will revert to a more typical 2.5 to 2.75 percent by the late 1990s.

Suggested Citation

  • Stephen K. McNees, 1991. "How fast can we grow?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-14.
    • Handle: RePEc:fip:fedbne:y:1991:i:jan:p:3-14
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    File URL: http://www.bostonfed.org/economic/neer/neer1991/neer191a.pdf
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    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Robin L. Lumsdaine & David A. Wise, 1994. "Aging and Labor Force Participation: A Review of Trends and Explanations," NBER Chapters, in: Aging in the United States and Japan: Economic Trends, pages 7-42, National Bureau of Economic Research, Inc.
    3. David M. Cutler & James M. Poterba & Louise M. Sheiner & Lawrence H. Summers, 1990. "An Aging Society: Opportunity or Challenge?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 1-74.
    4. Gary S. Fields & Olivia S. Mitchell, 1984. "Retirement, Pensions, and Social Security," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262060914, April.
    5. repec:fth:harver:1490 is not listed on IDEAS
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    Cited by:

    1. Nelissen, J.H.M. & Vossen, A.P.J.G., 1993. "The impact of population growth on the standard of living : Demo-economic scenarios for The Netherlands," Other publications TiSEM 74b5b019-e39f-4431-a17e-5, Tilburg University, School of Economics and Management.
    2. Richard W. Kopcke, 1992. "Profits and stock prices: the importance of being earnest," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 26-44.
    3. Neil H. Buchanan, 1998. "Comparing Alternative Methods of Adjusting U.S. Federal Fiscal Deficits for Cyclical and Price Effects," Macroeconomics 9805025, University Library of Munich, Germany.

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    Keywords

    Productivity; Labor supply;

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