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Mapping prices into productivity in multisector growth models

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  • L. Ngai
  • Roberto Samaniego

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Abstract

Two issues related to mapping a multi-sector model into a reduced-form value-added model are often neglected: the composition of intermediate goods, and the distinction between value added productivity and gross output productivity. We demonstrate their quantitative significance for the case of the well known model of Greenwood, Hercowitz and Krusell (1997), who find that about 60% of economic growth can be attributed to investment-specific technical change (ISTC). When we recalibrate their model to allow for even a small equipment share of intermediates, we find that ISTC accounts for almost the entirety of postwar US growth.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 14 (2009)
Issue (Month): 3 (September)
Pages: 183-204

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Handle: RePEc:kap:jecgro:v:14:y:2009:i:3:p:183-204

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Web page: http://www.springerlink.com/link.asp?id=102931

Related research

Keywords: Intermediate goods; Investment-specific technical change; Growth accounting; Value added; Multisector growth models; E13; O30; O41; O47;

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References

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  1. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
  2. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-80, September.
  3. Ngai, Liwa Rachel & Pissarides, Christopher, 2004. "Structural Change in a Multi-Sector Model of Growth," CEPR Discussion Papers 4763, C.E.P.R. Discussion Papers.
  4. Ngai, L. Rachel & Pissarides, Christopher, 2008. "Employment outcomes in the welfare state," Open Access publications from London School of Economics and Political Science http://eprints.lse.ac.uk/, London School of Economics and Political Science.
  5. Basu, Susanto, 1995. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," American Economic Review, American Economic Association, vol. 85(3), pages 512-31, June.
  6. Ngai, L. Rachel & Pissarides, Christopher, 2008. "Trends in hours and economic growth," Open Access publications from London School of Economics and Political Science http://eprints.lse.ac.uk/, London School of Economics and Political Science.
  7. Hui He & Zheng Liu, 2007. "Investment-specific technological change, skill accumulation, and wage inequality," Working Papers 644, Federal Reserve Bank of Minneapolis.
  8. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, April.
  9. Ngai, Liwa Rachel & Samaniego, Roberto, 2009. "Mapping prices into productivity in multisector growth models," CEPR Discussion Papers 7318, C.E.P.R. Discussion Papers.
  10. Dale Jorgenson & Mun Ho & Jon Samuels & Kevin Stiroh, 2007. "Industry Origins of the American Productivity Resurgence," Economic Systems Research, Taylor and Francis Journals, vol. 19(3), pages 229-252.
  11. Kongsamut, P. & Rebelo, S. & Xie, D., 1997. "Beyong Balanced Growth," RCER Working Papers 438, University of Rochester - Center for Economic Research (RCER).
  12. Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 207-230, January.
  13. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
  14. Jason G. Cummins & Giovanni L. Violante, 2002. "Investment-specific technical change in the US (1947-2000): measurement and macroeconomics consequences," Finance and Economics Discussion Series 2002-10, Board of Governors of the Federal Reserve System (U.S.).
  15. Whelan, Karl, 2003. " A Two-Sector Approach to Modeling U.S. NIPA Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 627-56, August.
  16. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  17. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 413-451, June.
  18. Norihiko Yamano & Nadim Ahmad, 2006. "The OECD Input-Output Database: 2006 Edition," OECD Science, Technology and Industry Working Papers 2006/8, OECD Publishing.
  19. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
  20. Hulten, Charles R, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 511-18, October.
  21. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, April.
  22. Huang, Kevin X. D. & Liu, Zheng, 2001. "Production chains and general equilibrium aggregate dynamics," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 437-462, October.
  23. Kevin D. Sheedy, 2007. "Inflation Persistence When Price Stickiness Differs Between Industries," CEP Discussion Papers dp0838, Centre for Economic Performance, LSE.
  24. Michael Horvath, 1998. "Cyclicality and Sectoral Linkages: Aggregate Fluctuations from Independent Sectoral Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 781-808, October.
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Citations

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Cited by:
  1. Mehdi Senouci, 2012. "Technical change in a neoclassical two-sector model of optimal growth," Working Papers halshs-00589627, HAL.
  2. Holly, S. & Petrella, I., 2010. "Factor Demand Linkages, Technology Shocks and the Business Cycle," Cambridge Working Papers in Economics 1001, Faculty of Economics, University of Cambridge.
  3. Aoki, Shuhei, 2011. "A Model of Technology Transfer in Japan's Rapid Economic Growth Period," MPRA Paper 29235, University Library of Munich, Germany.
  4. Xiaodong Zhu & Dennis Tao Yang, 2007. "Modernization of Agriculture and Long Term Growth," 2007 Meeting Papers 679, Society for Economic Dynamics.
  5. L. Rachel Ngai & Roberto M. Samaniego, 2008. "Mapping Prices into Productivity in Multisector Growth Models," CEP Discussion Papers dp0869, Centre for Economic Performance, LSE.
  6. Evangelia Vourvachaki, 2009. "Information and Communication Technologies in a Multi-sector Endogenous Growth Model," CERGE-EI Working Papers wp386, The Center for Economic Research and Graduate Education - Economic Institute, Prague.

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