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Transition Dynamics in Vintage Capital Models: Explaining the Postwar Catch-up of Germany and Japan

  • Simon Gilchrist

    ()

    (Institute for Economic Development, Boston University)

  • John C. Williams

    ()

    (Board of Governors, Federal Reserve System)

We consider a neoclassical interpretation of Germany and Japan’s rapid postwar growth that relies on a catch-up mechanism through capital accumulation where technology is embodied in new capital goods. Using a putty-clay model of production and investment, we are able to capture many of the key empirical properties of Germany and Japan’s postwar transitions, including persistently high but declining rates of labor and total-factor productivity growth, a U-shaped response of the capital-output ratio, rising rates of investment and employment, and moderate rates of return to capital.

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File URL: http://people.bu.edu/sgilchri/research/transition_51.pdf
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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - The Institute for Economic Development Working Papers Series with number dp-113.

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Length: 29 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:bos:iedwpr:dp-113
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  1. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-85, July.
  2. Lawrence J. Christiano, 1989. "Understanding Japan's saving rate: the reconstruction hypothesis," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 10-25.
  3. King, R.G. & Rebelo, S.T., 1989. "Transitional Dynamics And Economic Growth In The Neoclassical Model," RCER Working Papers 206, University of Rochester - Center for Economic Research (RCER).
  4. Kydland, Finn E & Prescott, Edward C, 1991. "Hours and Employment Variation in Business Cycle Theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 1(1), pages 63-81, January.
  5. Wolff, Edward N, 1996. "The Productivity Slowdown: The Culprit at Last? Follow-Up on Hulten and Wolff," American Economic Review, American Economic Association, vol. 86(5), pages 1239-52, December.
  6. Jeremy Greenwood & Boyan Jovanovic, 1998. "Accounting for Growth," NBER Working Papers 6647, National Bureau of Economic Research, Inc.
    • Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, in: New Developments in Productivity Analysis, pages 179-224 National Bureau of Economic Research, Inc.
  7. Francisco Alvarez-Cuadrado, 2006. "Growth Outside The Stable Path: Lessons From The European Reconstruction," Departmental Working Papers 2006-02, McGill University, Department of Economics.
  8. Jonathan Eaton & Samuel Kortum, 1995. "Engines of Growth: Domestic and Foreign Sources of Innovation," NBER Working Papers 5207, National Bureau of Economic Research, Inc.
  9. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-62, June.
  10. Simon Gilchrist & John C. Williams, 2000. "Putty-Clay and Investment: A Business Cycle Analysis," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 928-960, October.
  11. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  12. Charles R. Hulten, 1991. "Introduction to "Productivity Growth in Japan and the United States"," NBER Chapters, in: Productivity Growth in Japan and the United States, pages 1-27 National Bureau of Economic Research, Inc.
  13. Charles R. Hulten, 1991. "Productivity Growth in Japan and the United States," NBER Books, National Bureau of Economic Research, Inc, number hult91-1.
  14. Fumio Hayashi, 1989. "Is Japan's saving rate high?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-9.
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