Diminished dynamism has been linked to a marked slowdown in the reallocation of labor and capital from low-productivity establishments and firms to high-productivity ones, especially in innovative sectors like high tech. 7 Both phenomena are closely related to the declining trend in new business creation. 8 Are we doomed to slow productivity growth for the foreseeable future? We don’t know.
9 On the encouraging side, the technological frontier appears to be advancing rapidly in some sectors, and there are hints that the firm start-up rate is improving.