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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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File URL: http://eprints.lse.ac.uk/19579/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 19579.

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Length: 20 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:ehl:lserod:19579

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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. 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. Chris Pissarides, 2008. "Employment Outcomes in the Welfare State," 2008 Meeting Papers 1096, Society for Economic Dynamics.
  3. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
  4. Ngai, L. Rachel & Pissarides, Christopher A., 2005. "Structural Change in a Multi-Sector Model of Growth," IZA Discussion Papers 1800, Institute for the Study of Labor (IZA).
  5. 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.
  6. Ngai, L. Rachel & Pissarides, Christopher A., 2007. "Trends in Hours and Economic Growth," IZA Discussion Papers 2540, Institute for the Study of Labor (IZA).
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  11. 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.).
  12. 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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  14. 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).
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  16. 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.
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  18. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
  19. L. Rachel Ngai & Roberto M. Samaniego, 2008. "Mapping Prices into Productivity in Multisector Growth Models," CEP Discussion Papers dp0869, Centre for Economic Performance, LSE.
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Citations

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Cited by:
  1. Ngai, Liwa Rachel & Samaniego, Roberto, 2009. "Mapping prices into productivity in multisector growth models," CEPR Discussion Papers 7318, C.E.P.R. Discussion Papers.
  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. Ilyina, Anna & Samaniego, Roberto, 2012. "Structural change and financing constraints," Journal of Monetary Economics, Elsevier, vol. 59(2), pages 166-179.
  4. Holly, Sean & Petrella, Ivan, 2009. "Factor Demand Linkages, Technology Shocks and the Business Cycle," MPRA Paper 18120, University Library of Munich, Germany.
  5. Dennis Tao Yang & Xiaodong Zhu, 2013. "Modernization of Agriculture and Long-Term Growth," Working Papers tecipa-472, University of Toronto, Department of Economics.
  6. repec:hal:wpaper:halshs-00589627 is not listed on IDEAS
  7. Giuseppe Berlingieri, 2013. "Outsourcing and the rise in services," LSE Research Online Documents on Economics 51532, London School of Economics and Political Science, LSE Library.
  8. Jan Grobovsek (University of Edinburgh), 2013. "Development Accounting with Intermediate Goods," ESE Discussion Papers 223, Edinburgh School of Economics, University of Edinburgh.
  9. 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.

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