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Accounting for Growth with New Inputs

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  • Feenstra, Robert C
  • Markusen, James R

Abstract

This paper examines the aggregate production function in an economy characterized by the creation of new, intermediate inputs. The authors show how growth can be decomposed into changes in higher quantities of existing inputs and a greater range of inputs. Indexes of total factor productivity would reflect the latter. The authors construct a dynamic monopolistic-competition model in which products are endogenously introduced and simulate that model to produce artificial data. When used in standard growth-accounting regressions, the data can appear to be generated by an economy with exogenous technical change and (approximately) constant returns to primary factors. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Feenstra, Robert C & Markusen, James R, 1994. "Accounting for Growth with New Inputs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 429-447, May.
    • Handle: RePEc:ier:iecrev:v:35:y:1994:i:2:p:429-47
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