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Notes on Growth Accounting

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  • Robert J. Barro

Abstract

Growth accounting breaks down economic growth into components associated with changes in factor inputs and the Solow residual, which reflects technological progress and other elements. This exercise is generally viewed as a preliminary step for the analysis of fundamental determinants of growth and is especially useful if the determinants of factor growth rates are substantially independent from those that matter for technological change. This paper begins with a short presentation of the basics of growth accounting. The analysis then considers dual approaches to growth accounting (which considers changes in factor prices rather than quantities), spillover effects and increasing returns, taxes, and multiple types of factor inputs. Later sections place the growth-accounting exercise within the context of two recent strands of endogenous growth theory -- varieties-of-products models and quality-ladders models. Within these settings, the Solow residual can be interpreted in terms of measures of the endogenously changing level of technology. This technology corresponds, in one case, to a number of types of intermediate products that have been invented and, in the other case, to an index of the aggregate quality of intermediate inputs. The models have implications for the relation of the Solow residual to R&D outlays and also provide a clear interpretation of the 'R&D capital stock.'

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6654.

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Date of creation: Jul 1998
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Publication status: published as Journal of Economic Growth, Vol. 4, no. 2 (June 1999): 119-137
Handle: RePEc:nbr:nberwo:6654

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  1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  2. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  3. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  4. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
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  7. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  8. David, P.A., 1989. "Computer And Dynamo: The Modern Productivity Paradox In A Not-Too Distant Mirror," The Warwick Economics Research Paper Series (TWERPS) 339, University of Warwick, Department of Economics.
  9. Coe, David T & Helpman, Elhanan, 1993. "International R&D Spillovers," CEPR Discussion Papers 840, C.E.P.R. Discussion Papers.
  10. Timothy F. Bresnahan & Manuel Trajtenberg, 1992. "General Purpose Technologies "Engines of Growth?"," NBER Working Papers 4148, National Bureau of Economic Research, Inc.
  11. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring.
  12. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  13. Jora R. Minasian, 1962. "The Economics of Research and Development," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 93-142 National Bureau of Economic Research, Inc.
  14. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1.
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