The secular stagnation of productivity growth

Servaas Storm*

*Corresponding author for this work

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The concern that an economy could experience persistent stagnation, caused by a structural weakness of aggregate demand, goes back to Alvin Hansen's thesis of “secular stagnation.” Hansen's thesis has been revived in recent times, when it became clear that productivity and potential growth in the OECD countries have been declining for decades. However, in line with deep-rooted theoretical beliefs, that inadequate demand can only affect growth in the short run, secular stagnation (of potential growth) is treated as an exclusively supply side problem, the root of which is a worrying steady decline in productivity growth. This paper argues that it is a mistake to dismiss secular demand stagnation as main cause of declining potential growth in the OECD. We argue that the theoretical case for demand-caused secular stagnation is strong and empirical evidence that it has affected the U.S. economy after the mid-1970s is entirely convincing. Demand is leading supply, also in the long run. Hansen had it right, after all.
Original languageEnglish
Title of host publicationHandbook of Economic Stagnation
Number of pages22
ISBN (Electronic)9780128158982
ISBN (Print)9780128162705
Publication statusPublished - 2022

Bibliographical note

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  • Demand-led growth
  • Induced technical progress
  • Marx-biased technological progress
  • Potential growth
  • Secular stagnation
  • TFP


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