Unbalanced growth slowdown refers to the reduction in aggregate productivity growth that results from the reallocation of economic activity to industries with low productivity growth. We show for the U.S. that unbalanced growth slowdown considerably reduced past productivity growth and we assess by how much it will reduce future productivity growth.
To achieve this, we build a novel model that generates the unbalanced growth slowdown of the postwar period. We obtain the surprising result that the stagnant industries do not take over our calibrated model economy and future reductions in aggregate productivity growth are considerably smaller than past ones.

Joint work with Georg Duernecker (University of Mannheim) and Berthold Herrendorf (Arizona State University).