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Transition dynamics in vintage capital models: explaining the postwar catch-up of Germany and Japan

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  • Simon Gilchrist
  • John C. Williams

Abstract

We consider a neoclassical interpretation of Germany and Japan's rapid postwar growth that relies on a catch-up mechanism through capital accumulation where technology is embodied in new capital goods. Using a putty-clay model of production and investment, we are able to capture many of the key empirical properties of Germany and Japan's postwar transitions, including persistently high but declining rates of labor and total-factor productivity growth, a U-shaped response of the capital-output ratio, rising rates of investment and employment, and moderate rates of return to capital.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 01-1.

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Date of creation: 2001
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Handle: RePEc:fip:fedbwp:01-1

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Keywords: Productivity;

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  1. Jonathan Eaton & Samuel Kortum, 1995. "Engines of Growth: Domestic and Foreign Sources of Innovation," NBER Working Papers 5207, National Bureau of Economic Research, Inc.
  2. Kydland, Finn E & Prescott, Edward C, 1991. "Hours and Employment Variation in Business Cycle Theory," Economic Theory, Springer, vol. 1(1), pages 63-81, January.
  3. Ray C. Fair & John B. Taylor, 1980. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Cowles Foundation Discussion Papers 564, Cowles Foundation for Research in Economics, Yale University.
  4. King, R.G. & Rebelo, S.T., 1989. "Transitional Dynamics And Economic Growth In The Neoclassical Model," RCER Working Papers 206, University of Rochester - Center for Economic Research (RCER).
  5. Francisco Alvarez-Cuadrado, 2006. "Growth Outside The Stable Path: Lessons From The European Reconstruction," Departmental Working Papers 2006-02, McGill University, Department of Economics.
  6. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-62, June.
  7. Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, in: New Developments in Productivity Analysis, pages 179-224 National Bureau of Economic Research, Inc.
  8. Wolff, Edward N, 1996. "The Productivity Slowdown: The Culprit at Last? Follow-Up on Hulten and Wolff," American Economic Review, American Economic Association, vol. 86(5), pages 1239-52, December.
  9. Simon Gilchrist & John C. Williams, 1998. "Putty-Clay and Investment: A Business Cycle Analysis," NBER Working Papers 6812, National Bureau of Economic Research, Inc.
  10. Fumio Hayashi, 1989. "Is Japan's saving rate high?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-9.
  11. Lawrence J. Christiano, 1989. "Understanding Japan's saving rate: the reconstruction hypothesis," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 10-25.
  12. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  13. Charles R. Hulten, 1991. "Introduction to "Productivity Growth in Japan and the United States"," NBER Chapters, in: Productivity Growth in Japan and the United States, pages 1-27 National Bureau of Economic Research, Inc.
  14. Charles R. Hulten, 1991. "Productivity Growth in Japan and the United States," NBER Books, National Bureau of Economic Research, Inc, number hult91-1, May.
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