Martin Baily’s Lessons from a Career in Productivity Research (must read!)

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Productivity is key to economic growth and thus the main driver of a country’s standard of living. And while the world is changing, Martin Baily emphasizes that “it remains just as important today to use resources as efficiently and productively as possible, subject to meeting climate goals. Moreover, even though increases in productivity have not translated one-for-one into wage increases for all workers, it is still the case that faster productivity growth means faster wage growth on average, and it makes more resources available to help those with low incomes.”

Dr. Baily, who was the Chairman of the Council of Economic Advisers during the Clinton administration and a Senior Fellow at Brookings, is one of the world’s leading experts in productivity research. His paper, Lessons from a Career in Productivity Research: Some Answers, A Glimpse of the Future, and Much Left to Learn, (International Productivity Monitor, No. 44, Spring 2023, pp 120) is a must-read for economists, politicians and everybody who wants to understand economic dynamics in this rapidly changing world.


This study presents lessons learned from a career in productivity research. It examines the extent to which the key empirical questions about productivity have been answered. Aggregate and industry growth data are reviewed and show how a few industries con- tribute a lot to overall growth; notable is the large contribution of high-tech manufacturing to U.S. TFP growth (also the case for Japan). There is an extended summary of the lessons learned from cross-country comparisons of the levels of productivity in different industries using business economics information. Strong competitive intensity is positive for produc- tivity, while regulations and trade restrictions are negative. The article concludes with an optimistic note on the productivity impact of generative AI.

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