Summary:Total factor productivity (TFP) growth began slowing in the United States in the mid-2000s,
before the Great Recession. To many, the main culprit is the fading positive impact of the
information technology (IT) revolution that took place in the 1990s. But our estimates of TFP
growth across the U.S. states reveal that the slowdown in TFP was quite widespread and not
particularly stronger in IT-producing states or in those with a relatively more intensive usage
of IT. An alternative explanation offered in this paper is that the slowdown in U.S. TFP
growth reflects a loss of efficiency or market dynamism over the last two decades. Indeed,
there are large differences in production efficiency across U.S. states, with the states having
better educational attainment and greater investment in R&D being closer to the production
“frontier.”
