Total Factor Productivity in the Construction Industry

Conventional wisdom asserts productivity growth within the construction industry has been in decline for decades in comparison to other US industries. If productivity is indeed low, there is an enormous opportunity for construction firms to create value. The purpose of this study is to test the conventional wisdom by considering total factor productivity (TFP) growth. To do so, I estimate and analyze total factor productivity growth in the construction industry and compare this to total factor productivity growth in other industries. My results suggest both the construction industry and other industries observe periods of positive and negative productivity growth. While conventional wisdom appears to be true in some periods when construction TFP is declining, other periods indicate TFP growth. Moreover, TFP has grown neither more quickly nor more slowly than in other major industries.