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A Two-Sector Approach to Modeling U.S. NIPA Data

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  • Whelan, Karl

Abstract

The one-sector Solow-Ramsey model is the most popular model of long-run economic growth. This paper argues that a two-sector approach, in which technological progress in the production of durable goods exceeds that in the rest of the economy, provides a far better picture of the long-run behavior of the U.S. economy. The paper shows how to use the two-sector approach to model the real chain-aggregated variables currently featured in the U.S. National Income and Product Accounts. It is shown that each of the major chain-aggregates--output, consumption, investment, and capital stock--will tend in the long run to grow at steady, but different, rates. Implications for empirical analysis based on these data are explored.

Suggested Citation

  • Whelan, Karl, 2003. "A Two-Sector Approach to Modeling U.S. NIPA Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 627-656, August.
  • Handle: RePEc:mcb:jmoncb:v:35:y:2003:i:4:p:627-56
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    References listed on IDEAS

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    1. Karl Whelan, 2000. "A guide to the use of chain aggregated NIPA data," Finance and Economics Discussion Series 2000-35, Board of Governors of the Federal Reserve System (U.S.).
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