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Mapping Prices into Productivity in Multisector Growth Models

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  • L. Rachel Ngai
  • Roberto M. Samaniego

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.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0869.

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Date of creation: May 2008
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Handle: RePEc:cep:cepdps:dp0869

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: Intermediate goods; investment-specific technical change; growth accounting; gross output; multisector growth models;

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References

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  1. Basu, S., 1993. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," Papers 93-23, Michigan - Center for Research on Economic & Social Theory.
  2. Rachel Ngai & Christopher Pissarides, 2006. "Trends in Hours and Economic Growth," 2006 Meeting Papers 56, Society for Economic Dynamics.
  3. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
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  9. L. Rachel Ngai & Roberto M. Samaniego, 2008. "Mapping prices into productivity in multisector growth models," LSE Research Online Documents on Economics 19579, London School of Economics and Political Science, LSE Library.
  10. 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.
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  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. L. Rachel Ngai & Roberto M. Samaniego, 2008. "Mapping Prices into Productivity in Multisector Growth Models," CEP Discussion Papers dp0869, Centre for Economic Performance, LSE.
  2. Xiaodong Zhu & Dennis Tao Yang, 2007. "Modernization of Agriculture and Long Term Growth," 2007 Meeting Papers 679, Society for Economic Dynamics.
  3. Giuseppe Berlingieri, 2013. "Outsourcing and the Rise in Services," CEP Discussion Papers dp1199, Centre for Economic Performance, LSE.
  4. Ilyina, Anna & Samaniego, Roberto, 2012. "Structural change and financing constraints," Journal of Monetary Economics, Elsevier, vol. 59(2), pages 166-179.
  5. Aoki, Shuhei, 2011. "A Model of Technology Transfer in Japan's Rapid Economic Growth Period," MPRA Paper 29235, University Library of Munich, Germany.
  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.
  7. Jan Grobovsek (University of Edinburgh), 2013. "Development Accounting with Intermediate Goods," ESE Discussion Papers 223, Edinburgh School of Economics, University of Edinburgh.
  8. Holly, Sean & Petrella, Ivan, 2009. "Factor Demand Linkages, Technology Shocks and the Business Cycle," MPRA Paper 18120, University Library of Munich, Germany.
  9. Mehdi Senouci, 2012. "Technical change in a neoclassical two-sector model of optimal growth," Working Papers halshs-00589627, HAL.

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