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Input Price Shocks and the Slowdown in Economic Growth: The Case of U.K.Manufacturing

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  • Michael Bruno
  • Jeffrey Sachs
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    Abstract

    This paper provides a theoretical and empirical analysis of the effects of input price shocks on economic growth, with a focus on United Kingdom manufacturing in the 1970s. The theoretical model predicts a discrete decline in out- put and productivity after an input price rise, and a longer-run slowdown in productivity growth, real wage growth, and capital accumulation. These features characterize the United Kingdom and most other OECD economies after 1973. The empirical results confirm the important role of input prices in recent U.K. adjustment, but also point to an important role for other supply and demand factors.

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    File URL: http://www.nber.org/papers/w0851.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0851.

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    Date of creation: Feb 1982
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    Publication status: published as Bruno, Micahel and Jeffrey Sachs. "Input Price Shocks and the Slowdown in Economic Growth: The Case of U.K. Manufacturing." Review of Economic Studies , Vol. 51, No. 159, (1982), pp. 679-706.
    Handle: RePEc:nbr:nberwo:0851

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    1. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-44, December.
    2. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
    3. Michael Bruno & Jeffrey Sachs, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," NBER Working Papers 0852, National Bureau of Economic Research, Inc.
    4. Jeffrey D. Sachs, 1979. "Wages, Profits, and Macroeconomic Adjustment: A Comparative Study," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 269-332.
    5. Oulton, Nicholas, 1981. "Aggregate Investment and Tobin's Q: The Evidence from Britain," Oxford Economic Papers, Oxford University Press, vol. 33(2), pages 177-202, July.
    6. Bruno, Michael & Sachs, Jeffrey, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 845-59, Special I.
    7. Oulton, Nicholas, 1978. "Explaining aggregate investment in Britain : The importance of Tobin's Q," Economics Letters, Elsevier, vol. 1(3), pages 253-257.
    8. James M. Poterba & Lawrence H. Summers, 1981. "Dividend Taxes, Corporate Investment, and "Q"," NBER Working Papers 0829, National Bureau of Economic Research, Inc.
    9. Grubb, David B & Jackman, Richard A & Layard, Richard G, 1982. "Causes of the Current Stagflation," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 707-30, Special I.
    10. Berndt, Ernst R & Wood, David O, 1979. "Engineering and Econometric Interpretations of Energy-Capital Complementarity," American Economic Review, American Economic Association, vol. 69(3), pages 342-54, June.
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