Why Potential GDP Has Been Cut in Half Since the 1950’s?
The main reason is a lower productivity than previous business cycles, due to:
– lower population growth
– the service sector is growing faster than the industry sector
– lower quality jobs in the service sector have a lower productivity than in the industrial sector associated with higher quality jobs
– low interest rates and investor demand for leveraged loans have created zombie firms
– a poor education system leads to more open jobs than unemployed workers, because workers are not skilled enough to fill the jobs