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The Measurement of Growth under Embodied Technical Change

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  • Omar LICANDRO

    (European University Institute)

  • Javier RUIZ-CASTILLO

    (Universidad Carlos III de Madrid)

  • Jorge DURAN

    (Universidad de Alicante)

Abstract

New U.S. evidence from NIPA contradicts some of the well-known Kaldor stylized facts, and call for a reformulation of the modem theory of economic growth. Among these new facts, two must be stressed : A permanent decline in the relative price of durable goods, and a permanent increase in the real equipment to real GDP ratio. To be consistent with these new facts, growth models must include at least two sectors and address the problem of defining aggregate output. In this paper, the economic theory of index numbers is used to define the growth rate of real output in a growth model with embodied technical change. The main findings are : (i) NIPA's methodology measures growth in accordance with the economic theory on index numbers, and (ii) when the growth rate is measured as in NIPA, the contribution of embodied technical change to per capital GDP growth in the U.S. is 69%, which reinforce the claim that embodied technical change is important for growth.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (REL - Recherches Economiques de Louvain) with number 2002011.

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Length: 14
Date of creation: 01 Mar 2002
Date of revision:
Handle: RePEc:ctl:louvre:2002011

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Keywords: Embodied technical change; Growth facts; Growth accounting; Index number theory;

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References

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  1. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9510, University of Western Ontario, Department of Economics.
  2. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, 01-2013.
  3. Karl Whelan, 2000. "A guide to the use of chain aggregated NIPA data," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2000-35, Board of Governors of the Federal Reserve System (U.S.).
  4. Michael Reiter, 1999. "Asset prices and the measurement of wealth and saving," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 396, Department of Economics and Business, Universitat Pompeu Fabra.
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Cited by:
  1. BOUCEKKINE, Raouf & del RIO, Fernando & LICANDRO, Omar, 2002. "Obsolescence and modernization in the growth process," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2002067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Jorge Durán & Omar Licandro, 2012. "Is the GDP Growth Rate in NIPA a Welfare Measure?," Working Papers 665, Barcelona Graduate School of Economics.
  3. Gabriel J Felbermayr & Omar Licandro, 2002. "Embodied technical change in a two-sector AK model," Macroeconomics, EconWPA 0210001, EconWPA.
  4. Bianco, Dominique, 2007. "An Endogenous Growth Model with Embodied Technical Change without Scale Effects," MPRA Paper 6571, University Library of Munich, Germany, revised 04 Jan 2008.

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