Advanced Search
MyIDEAS: Login

Modeling Long-Run Economic Growth: Technical Paper 2003-04

Contents:

Author Info

  • Robert W. Arnold
Registered author(s):

    Abstract

    This paper reviews the recent empirical literature on long-run growth to determine what factors influence growth in total factor productivity (TFP) and whether there are any channels of influence that should be added to standard models of long-run growth. Factors affecting productivity fall into three general categories: physical capital, human capital, and innovation (including other factors that might influence TFP growth). Recent empirical evidence provides little support for the idea that there are extra-normal returns to physical capital accumulation, nor is there solid justification for adding a separate channel of influence from capital to TFP growth. The paper finds evidence that human capital—as distinct from labor hours worked—is an important factor for growth but also that there is not yet a consensus about exactly how it should enter the model. Some argue that human capital should enter as a factor of production, while others argue that it merely spurs innovation. The forces governing TFP growth are not well understood, but there is evidence that R&D spending is a significant contributor and that its benefit to society may exceed its benefit to the company doing the spending—that is, it is a source of spillovers. The paper concludes with some examples of how standard models of growth could be modified to reflect some of the channels of influence identified in the empirical review.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/42xx/doc4284/2003-4.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Congressional Budget Office in its series Working Papers with number 14497.

    as in new window
    Length:
    Date of creation: 01 Jun 2003
    Date of revision:
    Handle: RePEc:cbo:wpaper:14497

    Contact details of provider:
    Postal: Second and D Streets, SW, Washington, DC 20515
    Phone: (202)226-2600
    Fax: (202)226-2714
    Web page: http://www.cbo.gov
    More information through EDIRC

    Related research

    Keywords:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Wolff, Edward N, 1991. "Capital Formation and Productivity Convergence over the Long Term," American Economic Review, American Economic Association, vol. 81(3), pages 565-79, June.
    2. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72 National Bureau of Economic Research, Inc.
    3. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    4. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
    5. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
    6. Evans, Paul, 1998. "Using Panel Data to Evaluate Growth Theories," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 295-306, May.
    7. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
    8. Zvi Griliches, 1992. "The Search for R&D Spillovers," NBER Working Papers 3768, National Bureau of Economic Research, Inc.
    9. Jones, C.I., 2000. "Sources of U.S. Economic Growth in a World of Ideas," Papers 99-29, United Nations World Employment Programme-.
    10. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc.
    11. Auerbach, Alan J & Hassett, Kevin A & Oliner, Stephen D, 1994. "Reassessing the Social Returns to Equipment Investment," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 789-802, August.
    12. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
    13. Blomström, Magnus & Lipsey, Robert E & Zejan, Mario, 1993. "Is Fixed Investment the Key to Economic Growth?," CEPR Discussion Papers 870, C.E.P.R. Discussion Papers.
    14. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
    15. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    16. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
    17. repec:chb:bcchwp:03 is not listed on IDEAS
    18. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
    19. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    20. Howard Pack, 1994. "Endogenous Growth Theory: Intellectual Appeal and Empirical Shortcomings," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 55-72, Winter.
    21. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
    22. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
    23. Charles R. Hulten, 2000. "Total Factor Productivity: A Short Biography," NBER Working Papers 7471, National Bureau of Economic Research, Inc.
    24. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
    25. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    26. Easterly, William, 1993. "How much do distortions affect growth?," Journal of Monetary Economics, Elsevier, vol. 32(2), pages 187-212, November.
    27. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
    28. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
    29. Lee, Kevin & Pesaran, M Hashem & Smith, Ron, 1997. "Growth and Convergence in Multi-country Empirical Stochastic Solow Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 357-92, July-Aug..
    30. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
    31. Orazio P. Attanasio & Lucio Picci & Antonello E. Scorcu, 2000. "Saving, Growth, and Investment: A Macroeconomic Analysis Using a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 182-211, May.
    32. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
    33. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
    34. Evans, Paul & Karras, Georgios, 1996. "Do Economies Converge? Evidence from a Panel of U.S. States," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 384-88, August.
    35. Dale W. Jorgenson, 1995. "Productivity, Volume 1: Postwar US Economic Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100495, December.
    36. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    37. Christensen, Laurits R & Jorgenson, Dale W, 1970. "U.S. Real Product and Real Factor Input, 1929-1967," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 16(1), pages 19-50, March.
    38. Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
    39. Zvi Griliches, 1998. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 17-45 National Bureau of Economic Research, Inc.
    40. Alan Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," Working Papers 808, Princeton University, Department of Economics, Industrial Relations Section..
    41. Malcolm Knight & Norman Loayza & Delano Villanueva, 1993. "Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 512-541, September.
    42. Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc.
    43. Griliches, Zvi, 1988. "Productivity Puzzles and R&D: Another Nonexplanation," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 9-21, Fall.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:cbo:wpaper:14497. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.