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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

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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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10732.

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Date of creation: Sep 2004
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Handle: RePEc:nbr:nberwo:10732

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Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity

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  1. Jeremy Greenwood & Boyan Jovanovic, 1998. "Accounting for Growth," NBER Working Papers 6647, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    • Jeremy Greenwood & Boyan Jovanovic, 2000. "Accounting for Growth," RCER Working Papers 475, University of Rochester - Center for Economic Research (RCER). [Downloadable!]
    • 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. [Downloadable!]
  2. 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. [Downloadable!] (restricted)
  3. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-85, July. [Downloadable!] (restricted)
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  4. Simon Gilchrist & John C. Williams, 2000. "Putty-Clay and Investment: A Business Cycle Analysis," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 928-960, October. [Downloadable!] (restricted)
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  5. Eaton, Jonathan & Kortum, Samuel, 1997. "Engines of growth: Domestic and foreign sources of innovation," Japan and the World Economy, Elsevier, vol. 9(2), pages 235-259, May. [Downloadable!] (restricted)
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  6. Fumio Hayashi, 1989. "Is Japan's saving rate high?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-9. [Downloadable!]
  7. 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.
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  8. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-31, September. [Downloadable!] (restricted)
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  9. 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. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
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  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. [Downloadable!]
  12. Francisco Alvarez-Cuadrado, 2006. "Growth Outside The Stable Path: Lessons From The European Reconstruction," Departmental Working Papers 2006-02, McGill University, Department of Economics. [Downloadable!]
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  1. Edward Miguel & Gerard Roland, 2006. "The Long Run Impact of Bombing Vietnam," NBER Working Papers 11954, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Chris Papageorgiou & Fidel Perez-Sebastian, . "Human Capital and Convergence in a Non-Scale R&D Growth Model," Departmental Working Papers 2002-10, Department of Economics, Louisiana State University. [Downloadable!]
  3. Jonathan Eaton & Samuel Kortum, 2001. "Trade in Capital Goods," NBER Working Papers 8070, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Simon Gilchrist & John C. Williams, 2005. "Investment, Capacity, and Uncertainty: A Putty-Clay Approach," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 1-27, January. [Downloadable!] (restricted)
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  5. Francisco Alvarez-Cuadrado & Mihaela I. Pintea, 2008. "A Quantitative Exploration of the Golden Age of European Growth," Working Papers 0805, Florida International University, Department of Economics. [Downloadable!]
    Other versions:
  6. Santanu Chatterjee, 2003. "Capital Utilization, Economic Growth and Convergence," Computing in Economics and Finance 2003 41, Society for Computational Economics. [Downloadable!]
    Other versions:
  7. Kaiji Chen & Ayse Imrohoroglu & Selo Imrohoroglu, 2005. "Japanese Saving Rate," Macroeconomics 0502017, EconWPA. [Downloadable!]
    Other versions:
  8. Jordan Rappaport, 2002. "A bottleneck capital model of development," Research Working Paper RWP 01-10, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  9. Roc Armenter & Amartya Lahiri, 2006. "Endogenous productivity and development accounting," Staff Reports 258, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  10. Francisco Alvarez-Cuadrado, 2006. "Growth Outside The Stable Path: Lessons From The European Reconstruction," Departmental Working Papers 2006-02, McGill University, Department of Economics. [Downloadable!]
    Other versions:
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