Business Economics

, Volume 41, Issue 4, pp 39–45 | Cite as

Productivity and Wages

Investment in Physical and Human Capital must be Supported by Incentives
  • Edward P Lazear


The United States' output per capita is approximately 30 percent higher than in the developed European countries and Japan, and its productivity growth is among the highest in the world. Much of this record has been due to an environment that fosters growth in human and physical capital and innovation. Maintaining and enhancing this environment is key to the growth we need for our future. Flexibility in the labor force, fostering entrepreneurship, and high levels of education are major contributors to U.S. productivity increases, which have been tracked closely by growth of compensation. Future productivity growth will depend largely on incentives for investment in physical and human capital by appropriate tax policies, continuing a free flow of trade and foreign investment, and making sure that young Americans have the skills necessary to compete in the global economy.


productivity wages compensation employment human capital 

JEL Classifications

J2, J24 


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Copyright information

© National Association for Business Economics 2006

Authors and Affiliations

  • Edward P Lazear
    • 1
  1. 1.Council of Economic Advisers, The White HouseWashingtonUSA

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