WORLD WAR II AND THE GROWTH OF U.S. POTENTIAL OUTPUT
Alexander J. Field
ABSTRACT
Claims that the experience of economic mobilization between 1942 and 1945 laid the supply foundations for output and productivity growth in the United States after the war have formed the basis of the conventional wisdom for decades. This paper argues, in contrast, that the extraordinary mass production of ships, aircraft, and other munitions had little relevance for the postwar period because the wartime output mix and implicit factor prices were unique to that period, never to be repeated. Between 1941 and 1948, total factor productivity within manufacturing declined. Considering together the effects on TFP, the labor force, and the physical capital stock, the impact of World War II on the level and trajectory of US potential output following the war was, on balance, almost certainly negative.