The Measurement of Growth under Embodied Technical Change
New U.S. evidence from NIPA contradicts some of the well-known Kaldor stylized facts, and call for a reformulation of the modem theory of economic growth. Among these new facts, two must be stressed : A permanent decline in the relative price of durable goods, and a permanent increase in the real equipment to real GDP ratio. To be consistent with these new facts, growth models must include at least two sectors and address the problem of defining aggregate output. In this paper, the economic theory of index numbers is used to define the growth rate of real output in a growth model with embodied technical change. The main findings are : (i) NIPA's methodology measures growth in accordance with the economic theory on index numbers, and (ii) when the growth rate is measured as in NIPA, the contribution of embodied technical change to per capital GDP growth in the U.S. is 69%, which reinforce the claim that embodied technical change is important for growth.
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Finance and Economics Discussion Series
2000-35, Board of Governors of the Federal Reserve System (U.S.).
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