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Mapping prices into productivity in multisector growth models

  • Ngai, Liwa Rachel
  • Samaniego, Roberto

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 the productivity indices for value added and for gross output. We illustrate their significance for growth accounting using 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 account for the composition of intermediates, we find that ISTC accounts for an even greater share of post-war US growth.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7318.

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Date of creation: Jun 2009
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Handle: RePEc:cpr:ceprdp:7318
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  1. Draca, Mirko & Machin, Stephen & Witt, Robert, 2008. "Panic on the Streets of London: Police, Crime and the July 2005 Terror Attacks," IZA Discussion Papers 3410, Institute for the Study of Labor (IZA).
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  7. L. Rachel Ngai & Roberto M. Samaniego, 2008. "Mapping Prices into Productivity in Multisector Growth Models," CEP Discussion Papers dp0869, Centre for Economic Performance, LSE.
  8. Basu, S., 1993. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," Papers 93-23, Michigan - Center for Research on Economic & Social Theory.
  9. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
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  11. L. Rachel Ngai & Christopher Pissarides, 2004. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 3550, London School of Economics and Political Science, LSE Library.
  12. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
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