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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 San Francisco in its series Working Paper Series with number 2004-14.

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Date of creation: 2004
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Handle: RePEc:fip:fedfwp:2004-14

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Keywords: Economic development - Germany ; Economic development - Japan;

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  1. Eaton, Jonathan & Kortum, Samuel, 1997. "Engines of growth: Domestic and foreign sources of innovation," Japan and the World Economy, Elsevier, Elsevier, vol. 9(2), pages 235-259, May.
  2. 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.
  3. 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.
  4. 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).
  5. Robert G. King & Sergio T. Rebelo, 1989. "Transitional Dynamics and Economic Growth in the Neoclassical Model," NBER Working Papers 3185, National Bureau of Economic Research, Inc.
  6. Fumio Hayashi, 1989. "Is Japan's saving rate high?," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-9.
  7. Ray C. Fair & John B. Taylor, 1980. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear RationalExpectations Models," NBER Technical Working Papers 0005, National Bureau of Economic Research, Inc.
  8. Charles R. Hulten, 1991. "Productivity Growth in Japan and the United States," NBER Books, National Bureau of Economic Research, Inc, number hult91-1, October.
  9. Lawrence J. Christiano, 1989. "Understanding Japan's saving rate: the reconstruction hypothesis," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Spr, pages 10-25.
  10. Simon Gilchrist & John C. Williams, 1998. "Putty-clay and investment: a business cycle analysis," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-30, Board of Governors of the Federal Reserve System (U.S.).
  11. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(2), pages 298-321, April.
  12. 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.
  13. Francisco Alvarez-Cuadrado, 2006. "Growth Outside The Stable Path: Lessons From The European Reconstruction," Departmental Working Papers, McGill University, Department of Economics 2006-02, McGill University, Department of Economics.
  14. Finn E. Kydland & Edward C. Prescott, 1989. "Hours and employment variation in business cycle theory," Discussion Paper / Institute for Empirical Macroeconomics 17, Federal Reserve Bank of Minneapolis.
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