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Accounting for Growth

In: New Developments in Productivity Analysis

  • Jeremy Greenwood
  • Boyan Jovanovic

A satisfactory account of the postwar growth experience of the United States should be able to come to terms with the following three facts: 1. Since the early 1970's there has been a slump in the advance of productivity. 2. The price of new equipment has fallen steadily over the postwar period. 3. Since the mid-1970's the skill premium has risen. Variants of Solow's (1960) vintage-capital model can go a long way toward explaining these facts, as this paper shows. In brief, the explanations are: 1. Productivity slowed down because the implementation of information technologies was both costly and slow. 2. Technological advance in the capital goods sector has lead to a decline in equipment prices. 3. The skill premium rose because the new, more efficient capital is complementary with skilled labor and/or because the use of skilled labor facilitates the adoption of new technologies.

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This chapter was published in:
  • Charles R. Hulten & Edwin R. Dean & Michael J. Harper, 2001. "New Developments in Productivity Analysis," NBER Books, National Bureau of Economic Research, Inc, number hult01-1, September.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10127.
    Handle: RePEc:nbr:nberch:10127
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