The share market boom in the 1990s is often linked to the acceleration in labour
productivity over the same period. This paper explores the suggestions that labour productivity
may be an inaccurate measure of firm’s cash flow which underlies equity valuations, and that
innovations in productivity in the 1990s may have had only have temporary effects on capital
productivity, the key element of the more correct measure of cash flow. Using a century of data for
the OECD countries it is shown empirically that the link of productivity to share returns is indeed
strongest for capital productivity, but generally the link is weaker that is sometimes maintained in
the literature
