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Capital Quality Improvement and the Sources of Growth in the Euro Area

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  • Plutarchos Sakellaris
  • Focco W. Vijselaar

Abstract

The euro area experienced a slowdown in output and Total Factor Productivity growth in the 1990s compared to the 1980s. We ask the following questions. Is the apparent slowdown in euro area output due to a lack of proper accounting for capital quality improvement? The answer is no. Did technological change really slow down in the euro area? The answer here is mixed. The part of the technological change that is embodied in capital goods and boosts output through investment in these goods in fact accelerated in the 1990s. In contrast, disembodied technological change, which boosts output through new consumer goods or new production processes, decelerated in the 1990s more sharply than the official figures portray.

Suggested Citation

  • Plutarchos Sakellaris & Focco W. Vijselaar, 2005. "Capital Quality Improvement and the Sources of Growth in the Euro Area," CESifo Working Paper Series 1452, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1452
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    References listed on IDEAS

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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.
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    7. 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 342-362, June.
    8. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
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    Cited by:

    1. Martin Gonzalez Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," Working Papers 72, Universidad de San Andres, Departamento de Economia, revised Jun 2004.
    2. Antonopoulos, Christos & Sakellaris, Plutarchos, 2009. "The contribution of Information and Communication Technology investments to Greek economic growth: An analytical growth accounting framework," Information Economics and Policy, Elsevier, vol. 21(3), pages 171-191, August.
    3. Bruno Tissot & Les Skoczylas, 2005. "Revisiting recent productivity developments across OECD countries," BIS Working Papers 182, Bank for International Settlements.
    4. Philipp an de Meulen & Torsten Schmidt, 2013. "Von der Euroeinführung zur Schuldenkrise: Ergebnisse einer Wachstumszerlegung für ausgewählte Länder des Euroraums," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 82(2), pages 77-96.
    5. Koeniger, Winfried & Leonardi, Marco, 2006. "Capital Deepening and Wage Differentials: Germany vs. US," IZA Discussion Papers 2065, Institute for the Study of Labor (IZA).
    6. Musso, Alberto & Westermann, Thomas, 2005. "Assessing potential output growth in the euro area - a growth accounting perspective, January 2005," Occasional Paper Series 22, European Central Bank.
    7. Alka obadić & Sanja Porić, 2008. "The coordination between education and employment policies," EFZG Working Papers Series 0802, Faculty of Economics and Business, University of Zagreb.

    More about this item

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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