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Revisiting Solow’s Decomposition of Economic and Productivity Growth

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Author Info

  • Tung Liu

    ()
    (Department of Economics, Ball State University)

  • Kui-Wai Li

    ()
    (City University of Hong Kong, Hong Kong SAR)

Abstract

By relaxing the two assumptions of constant returns to scale and perfect competition in the product market used by Solow (1957), this paper identifies a new decomposition of economic and productivity growth. The sources of economic growth are; adjusted economies of scales effect, weighted sum of input growth, and technical progress. The sources of productivity growth are; adjusted economies of scale effect and technical progress. The weight used for the input growth is the cost share of each input.

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File URL: http://econfac.iweb.bsu.edu/research/workingpapers/bsuecwp200805liu.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Ball State University, Department of Economics in its series Working Papers with number 200805.

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Length: 12 pages
Date of creation: Dec 2008
Date of revision: Dec 2008
Handle: RePEc:bsu:wpaper:200805

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Keywords: Solow; Growth decomposition; Total factor productivity; Returns to scale;

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References

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  1. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  2. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  3. Paul Romer, 1991. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  4. Hanoch, Giora, 1975. "The Elasticity of Scale and the Shape of Average Costs," American Economic Review, American Economic Association, vol. 65(3), pages 492-97, June.
  5. Paul W. Bauer, 1988. "Decomposing TFP growth in the presence of cost inefficiency, nonconstant returns to scale, and technological progress," Working Paper 8813, Federal Reserve Bank of Cleveland.
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Cited by:
  1. Liu, Tung & Li, Kui-Wai, 2012. "Analyzing China's productivity growth: Evidence from manufacturing industries," Economic Systems, Elsevier, vol. 36(4), pages 531-551.

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