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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

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

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References

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  1. 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.
  2. L. Rachel Ngai & Christopher A. Pissarides, 2008. "Trends in Hours and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 239-256, April.
  3. L. Rachel Ngai & Christopher A. Pissarides, 2008. "Employment Outcomes in the Welfare State," CEP Discussion Papers dp0856, Centre for Economic Performance, LSE.
  4. L. Ngai & Roberto Samaniego, 2009. "Mapping prices into productivity in multisector growth models," Journal of Economic Growth, Springer, vol. 14(3), pages 183-204, September.
  5. Michael Gort & Jeremy Greenwood & Peter Rupert, 1998. "Measuring the rate of technological progress in structures," Working Paper 9806, Federal Reserve Bank of Cleveland.
  6. 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.).
  7. Karl Whelan, 2001. "A two-sector approach to modeling U.S. NIPA data," Finance and Economics Discussion Series 2001-04, Board of Governors of the Federal Reserve System (U.S.).
  8. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
  9. 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.
  10. Mirko Draca & Stephen Machin & Robert Witt, 2008. "Panic on the Streets of London: Police, Crime and the July 2005 Terror Attacks," CEP Discussion Papers dp0852, Centre for Economic Performance, LSE.
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  12. Kongsamut, Piyabha & Rebelo, Sergio & Xie, Danyang, 2001. "Beyond Balanced Growth," Review of Economic Studies, Wiley Blackwell, vol. 68(4), pages 869-82, October.
  13. 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).
  14. Norihiko Yamano & Nadim Ahmad, 2006. "The OECD Input-Output Database: 2006 Edition," OECD Science, Technology and Industry Working Papers 2006/8, OECD Publishing.
  15. Hui He & Zheng Liu, 2007. "Investment-specific technological change, skill accumulation, and wage inequality," Working Papers 644, Federal Reserve Bank of Minneapolis.
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  17. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, January.
  18. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
  19. Hulten, Charles R, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 511-18, October.
  20. Kevin D. Sheedy, 2007. "Inflation persistence when price stickiness differs between industries," LSE Research Online Documents on Economics 3738, London School of Economics and Political Science, LSE Library.
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  22. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, July.
  23. 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.
  24. 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.
  25. 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. Dennis Tao Yang & Xiaodong Zhu, 2009. "Modernization of Agriculture and Long-Term Growth," Working Papers tecipa-376, University of Toronto, Department of Economics.
  2. Aoki, Shuhei, 2011. "A Model of Technology Transfer in Japan's Rapid Economic Growth Period," IIR Working Paper 11-05, Institute of Innovation Research, Hitotsubashi University.
  3. Holly, Sean & Petrella, Ivan, 2009. "Factor Demand Linkages, Technology Shocks and the Business Cycle," MPRA Paper 18120, University Library of Munich, Germany.
  4. L. Ngai & Roberto Samaniego, 2009. "Mapping prices into productivity in multisector growth models," Journal of Economic Growth, Springer, vol. 14(3), pages 183-204, September.
  5. 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.
  6. Giuseppe Berlingieri, 2013. "Outsourcing and the Rise in Services," CEP Discussion Papers dp1199, Centre for Economic Performance, LSE.
  7. repec:hal:wpaper:halshs-00589627 is not listed on IDEAS
  8. Jan Grobovsek (University of Edinburgh), 2013. "Development Accounting with Intermediate Goods," ESE Discussion Papers 223, Edinburgh School of Economics, University of Edinburgh.
  9. Ilyina, Anna & Samaniego, Roberto, 2012. "Structural change and financing constraints," Journal of Monetary Economics, Elsevier, vol. 59(2), pages 166-179.

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