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A Model of Economic Growth and Structural Change

In: Growth and Employment in Europe

Author

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  • Martin Zagler

    (Vienna University of Economics and Business Administration)

Abstract

Several distinguished stylized facts form the new economy — an information technology service sector organized in network forms of organization, an inflation rate below its fundamentals, a stock market boom, low productivity rates but high rates of economic growth. This chapter presents a model in which new varieties of services are introduced to generate rents, and offers an explanation of the stock market boom of the late 1990s. Whilst a particular service provider is assumed to realize no productivity gains at all, the increase in variety increases value-added per employee, thus explaining high growth rates despite low productivity rates. This unmeasured productivity gain is the implicit reason for the intrinsic inertia in the consumer price index.

Suggested Citation

  • Martin Zagler, 2004. "A Model of Economic Growth and Structural Change," Palgrave Macmillan Books, in: Growth and Employment in Europe, chapter 3, pages 37-50, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-50632-9_3
    DOI: 10.1057/9780230506329_3
    as

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