Distributional Effects of Capital and Labor on Economic Growth
In the following we propose a growth model for an economy consisting of firms which are heterogeneous in technologies and input demands. We show that the growth rate in this economy depends not only on changes in the aggregate level of capital and labor, but also on changes in the allocation of these inputs across firms. As the latter effects are neglected in conventional growth models, they are misleadingly captured by the residual TFP measure. In contrast, we are able to quantify the infuence of these components. Our empirical analysis, which is based on structural estimation from firm-level data, reveals that changes in allocation of capital and labor have pronounced effects on GDP-growth for most European countries. Further, we take cross-country differences in the distributional effects into account to improve conventional growth accounting exercises. In particular, we find that they explain additionally up to 17% of growth differences among 19 European countries. Consequently, allowing for heterogeneity in firm-level technologies and input demands increases the explanatory power of the inputs.
|Date of creation:||Dec 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daron Acemoglu & Fabrizio Zilbotti, 1999.
NBER Working Papers
6879, National Bureau of Economic Research, Inc.
- Acemoglu, Daron & Zilibotti, Fabrizio, 1998. "Productivity Differences," Seminar Papers 660, Stockholm University, Institute for International Economic Studies.
- Acemoglu, D. & Zilibotti, F., 1998. "Productivity Differences," Papers 660, Stockholm - International Economic Studies.
- Acemoglu, Daron & Zilibotti, Fabrizio, 2000. "Productivity Differences," CEPR Discussion Papers 2498, C.E.P.R. Discussion Papers.
- Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1, June.
- Susanto Basu & David N. Weil, 1998.
"Appropriate Technology And Growth,"
The Quarterly Journal of Economics,
MIT Press, vol. 113(4), pages 1025-1054, November.
- Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Chapters, in: Resource and Output Trends in the United States Since 1870, pages 1-23 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:bon:bonedp:bgse20_2007. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (BGSE Office)
If references are entirely missing, you can add them using this form.