An econometric model of potential output, productivity growth, and resource utilization

This paper specifies a macroeconometric model providing a simultaneous framework for estimating the natural rate of unemployment, the full-employment (FE) labor force and hours of work, the FE productivity growth rate, and the growth path of potential (FE) output during 1960–2000. The estimated output and unemployment gaps are consistent with Okun’s Law. Historical perspective is provided on the expansion of the nineties by comparing it with those of the three previous decades in terms of growth and utilization of potential output. Factors accounting for the growth of potential output, productivity and labor supply are identified and compared.