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Mapping Prices into Productivity in Multisector Growth Models

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  • L. Rachel Ngai
  • Roberto M. Samaniego

Abstract

Two issues related to mapping a multi-sector model into a reduced-form value-added model are often neglected: the composition of intermediate goods, and the distinction between value added productivity and gross output productivity. We demonstrate their quantitative significance for the case of the well known model of Greenwood, Hercowitz and Krusell (1997), who find that about 60% of economic growth can be attributed to investment-specific technical change (ISTC). When we recalibrate their model to allow for even a small equipment share of intermediates, we find that ISTC accounts for almost the entirety of postwar US growth.

Suggested Citation

  • L. Rachel Ngai & Roberto M. Samaniego, 2008. "Mapping Prices into Productivity in Multisector Growth Models," CEP Discussion Papers dp0869, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0869
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    1. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
    2. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-980, September.
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    10. L. Rachel Ngai & Christopher A. Pissarides, 2008. "Trends in Hours and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 239-256, April.
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    Cited by:

    1. repec:wfo:wstudy:47501 is not listed on IDEAS
    2. Evangelia Vourvachaki, 2005. "Information and Communication Technologies in a Multi-Sector Endogenous Growth Model," Money Macro and Finance (MMF) Research Group Conference 2005 10, Money Macro and Finance Research Group.
    3. Nikolay Chernyshev, 2018. "From Productivity Shifts to Economic Growth: Intersectoral Linkage as an Amplifying Factor," CDMA Working Paper Series 201801, Centre for Dynamic Macroeconomic Analysis.
    4. Moro, Alessio & Rachedi, Omar, 2018. "The Changing Structure of Government Spending," MPRA Paper 86577, University Library of Munich, Germany.
    5. repec:wfo:wstudy:57893 is not listed on IDEAS
    6. Jan, Grobovsek, 2013. "Development Accounting Within Intermediate Goods," SIRE Discussion Papers 2013-42, Scottish Institute for Research in Economics (SIRE).
    7. Sean Holly & Ivan Petrella, 2012. "Factor Demand Linkages, Technology Shocks, and the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 948-963, November.
    8. Giuseppe Berlingieri, 2013. "Outsourcing and the Rise in Services," CEP Discussion Papers dp1199, Centre for Economic Performance, LSE.
    9. Yang, Dennis Tao & Zhu, Xiaodong, 2013. "Modernization of agriculture and long-term growth," Journal of Monetary Economics, Elsevier, vol. 60(3), pages 367-382.
    10. Claudio Baccianti & Andreas Löschel, 2014. "The Role of Product and Process Innovation in CGE Models of Environmental Policy," WWWforEurope Working Papers series 68, WWWforEurope.
    11. L. Ngai & Roberto Samaniego, 2009. "Mapping prices into productivity in multisector growth models," Journal of Economic Growth, Springer, vol. 14(3), pages 183-204, September.
    12. Diego Restuccia & Margarida Duarte, 2011. "Relative Prices and Sectoral Productivity," 2011 Meeting Papers 1345, Society for Economic Dynamics.
    13. Ilyina, Anna & Samaniego, Roberto, 2012. "Structural change and financing constraints," Journal of Monetary Economics, Elsevier, vol. 59(2), pages 166-179.
    14. Jan Grobovsek, 2013. "Development Accounting with Intermediate Goods," ESE Discussion Papers 223, Edinburgh School of Economics, University of Edinburgh.
    15. Mehdi Senouci, 2012. "Technical change in a neoclassical two-sector model of optimal growth," Working Papers halshs-00589627, HAL.
    16. Aoki, Shuhei, 2011. "A Model of Technology Transfer in Japan's Rapid Economic Growth Period," IIR Working Paper 11-05, Institute of Innovation Research, Hitotsubashi University.
    17. Cao, Shutao, 2017. "Accounting for productivity growth in a small open economy: Sector-specific technological change and relative prices of trade," Working Paper Series 6203, Victoria University of Wellington, School of Economics and Finance.
    18. Jan Grobovšek, 2011. "Development Accounting with Intermediate Goods," Working Papers 2011.85, Fondazione Eni Enrico Mattei.
    19. Claudio Baccianti & Andreas Löschel, 2015. "Investment-specific vs Process Innovation in a CGE model of Environmental Policy," WWWforEurope Working Papers series 85, WWWforEurope.

    More about this item

    Keywords

    Intermediate goods; investment-specific technical change; growth accounting; gross output; multisector growth models;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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