IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/19579.html
   My bibliography  Save this paper

Mapping prices into productivity in multisector growth models

Author

Listed:
  • Ngai, L. Rachel
  • Samaniego, Roberto M.

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

  • Ngai, L. Rachel & Samaniego, Roberto M., 2008. "Mapping prices into productivity in multisector growth models," LSE Research Online Documents on Economics 19579, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:19579
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/19579/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    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.
    3. Mirko Draca & Stephen Machin & Robert Witt, 2011. "Panic on the Streets of London: Police, Crime, and the July 2005 Terror Attacks," American Economic Review, American Economic Association, vol. 101(5), pages 2157-2181, August.
    4. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    5. Basu, Susanto, 1995. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," American Economic Review, American Economic Association, vol. 85(3), pages 512-531, June.
    6. L. Rachel Ngai & Christopher A. Pissarides, 2008. "Employment Outcomes in the Welfare State," Revue économique, Presses de Sciences-Po, vol. 59(3), pages 413-436.
    7. Charles R. Hulten, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Oxford University Press, vol. 45(3), pages 511-518.
    8. Hui He & Zheng Liu, 2008. "Investment-Specific Technological Change, Skill Accumulation, and Wage Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 314-334, April.
    9. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    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.
    11. Dale Jorgenson & Mun Ho & Jon Samuels & Kevin Stiroh, 2007. "Industry Origins of the American Productivity Resurgence," Economic Systems Research, Taylor & Francis Journals, vol. 19(3), pages 229-252.
    12. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 869-882.
    13. 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.
    14. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 413-451, June.
    15. Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 207-230, January.
    16. Whelan, Karl, 2003. "A Two-Sector Approach to Modeling U.S. NIPA Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 627-656, August.
    17. Norihiko Yamano & Nadim Ahmad, 2006. "The OECD Input-Output Database: 2006 Edition," OECD Science, Technology and Industry Working Papers 2006/8, OECD Publishing.
    18. Jason G. Cummins & Giovanni L. Violante, 2002. "Investment-Specific Technical Change in the US (1947-2000): Measurement and Macroeconomic Consequences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 243-284, April.
    19. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, January.
    20. Kevin D. Sheedy, 2007. "Inflation Persistence When Price Stickiness Differs Between Industries," CEP Discussion Papers dp0838, Centre for Economic Performance, LSE.
    21. Huang, Kevin X. D. & Liu, Zheng, 2001. "Production chains and general equilibrium aggregate dynamics," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 437-462, October.
    22. 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.
    23. Alex Bryson & Satu Nurmi, 2011. "Private sector employment growth, 1998--2004: a panel analysis of British workplaces," Cambridge Journal of Economics, Oxford University Press, vol. 35(1), pages 85-104.
    24. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
    25. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
    26. Ms. Piyabha Kongsamut & Danyang Xie & Mr. Sergio Rebelo, 2001. "Beyond Balanced Growth," IMF Working Papers 2001/085, International Monetary Fund.
    27. Michael Horvath, 1998. "Cyclicality and Sectoral Linkages: Aggregate Fluctuations from Independent Sectoral Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 781-808, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrew T. Foerster & Andreas Hornstein & Pierre-Daniel G. Sarte & Mark W. Watson, 2022. "Aggregate Implications of Changing Sectoral Trends," Journal of Political Economy, University of Chicago Press, vol. 130(12), pages 3286-3333.
    2. 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.
    3. Mehdi Senouci, 2012. "Technical change in a neoclassical two-sector model of optimal growth," Working Papers halshs-00589627, HAL.
    4. Alessio Moro, 2015. "Structural Change, Growth, and Volatility," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 259-294, July.
    5. Georges Daw, 2022. "Determinants of Wealth Disparities in the EU: A Multi-scale Development Accounting Investigation," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(2), pages 211-254, June.
    6. Margarida Duarte & Diego Restuccia, 2020. "Relative Prices and Sectoral Productivity," Journal of the European Economic Association, European Economic Association, vol. 18(3), pages 1400-1443.
    7. Yang, Dennis Tao & Zhu, Xiaodong, 2013. "Modernization of agriculture and long-term growth," Journal of Monetary Economics, Elsevier, vol. 60(3), pages 367-382.
    8. Ilyina, Anna & Samaniego, Roberto, 2012. "Structural change and financing constraints," Journal of Monetary Economics, Elsevier, vol. 59(2), pages 166-179.
    9. Jan Grobovsek, 2013. "Development Accounting with Intermediate Goods," Edinburgh School of Economics Discussion Paper Series 223, Edinburgh School of Economics, University of Edinburgh.
    10. Aoki, Shuhei, 2011. "A Model of Technology Transfer in Japan's Rapid Economic Growth Period," MPRA Paper 29235, University Library of Munich, Germany.
    11. 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.
    12. Berlingieri, Giuseppe, 2013. "Outsourcing and the rise in services," LSE Research Online Documents on Economics 51532, London School of Economics and Political Science, LSE Library.
    13. 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.
    14. 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.
    15. Grobovšek Jan, 2018. "Development accounting with intermediate goods," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(1), pages 1-27, January.
    16. Alessio Moro & Omar Rachedi, 2022. "The Changing Structure Of Government Consumption Spending," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(3), pages 1293-1323, August.
    17. Claudio Baccianti & Andreas Löschel, 2014. "The Role of Product and Process Innovation in CGE Models of Environmental Policy. WWWforEurope Working Paper No. 68," WIFO Studies, WIFO, number 47501, June.
    18. 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.
    19. Roberto Samaniego & Juliana Sun, 2016. "Productivity Growth and Structural Transformation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 21, pages 266-285, July.
    20. Moro, Alessio & Rachedi, Omar, 2018. "The Changing Structure of Government Spending," MPRA Paper 86577, University Library of Munich, Germany.
    21. Claudio Baccianti & Andreas Löschel, 2015. "Investment-specific versus Process Innovation in a CGE Model of Environmental Policy. WWWforEurope Working Paper No. 85," WIFO Studies, WIFO, number 57893, June.
    22. Jan, Grobovsek, 2013. "Development Accounting Within Intermediate Goods," SIRE Discussion Papers 2013-42, Scottish Institute for Research in Economics (SIRE).
    23. Grobovšek Jan, 2018. "Development accounting with intermediate goods," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(1), pages 1-27, January.
    24. Ma, Xiaohan & Samaniego, Roberto, 2022. "Business cycle dynamics when neutral and investment-specific technology shocks are imperfectly observable," Journal of Mathematical Economics, Elsevier, vol. 101(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caunedo, Julieta, 2020. "Aggregate fluctuations and the industry structure of the US economy," European Economic Review, Elsevier, vol. 129(C).
    2. Andrew T. Foerster & Andreas Hornstein & Pierre-Daniel G. Sarte & Mark W. Watson, 2022. "Aggregate Implications of Changing Sectoral Trends," Journal of Political Economy, University of Chicago Press, vol. 130(12), pages 3286-3333.
    3. Jorge Duran & Omar Licandro, 2015. "Is the output growth rate in NIPA a welfare measure?," Discussion Papers 2015/18, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    4. Berlingieri, Giuseppe, 2013. "Outsourcing and the rise in services," LSE Research Online Documents on Economics 51532, London School of Economics and Political Science, LSE Library.
    5. Roberto Samaniego & Juliana Sun, 2016. "Productivity Growth and Structural Transformation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 21, pages 266-285, July.
    6. Hasan Bakhshi & Jens Larsen, 2001. "Investment-specific technological progress in the United Kingdom," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 49-80, Bank for International Settlements.
    7. Moura, Alban, 2021. "Are neutral and investment-specific technology shocks correlated?," European Economic Review, Elsevier, vol. 139(C).
    8. Anthony Landry, 2018. "Capital-Goods Imports and U.S. Growth," 2018 Meeting Papers 208, Society for Economic Dynamics.
    9. Molinari, Benedetto & Rodríguez, Jesús & Torres, José L., 2013. "Growth and technological progress in selected Pacific countries," Japan and the World Economy, Elsevier, vol. 28(C), pages 60-71.
    10. Mukoyama, Toshihiko, 2008. "Endogenous depreciation, mismeasurement of aggregate capital, and the productivity slowdown," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 513-522, March.
    11. Joachim Hubmer, 2019. "The Race Between Preferences and Technology," 2019 Meeting Papers 1430, Society for Economic Dynamics.
    12. Oulton, Nicholas, 2007. "Investment-specific technological change and growth accounting," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1290-1299, May.
    13. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
    14. Matteo Iacoviello & Fabio Schiantarelli & Scott Schuh, 2011. "Input And Output Inventories In General Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(4), pages 1179-1213, November.
    15. Georges Daw, 2022. "Determinants of Wealth Disparities in the EU: A Multi-scale Development Accounting Investigation," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(2), pages 211-254, June.
    16. Luis Díez Catalán, 2018. "The labor share in the service economy," Working Papers 18/09, BBVA Bank, Economic Research Department.
    17. Daniel J. Wilson, 2002. "Is Embodied Technology the Result of Upstream R&D? Industry-Level Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 285-317, April.
    18. Greenwood, Jeremy & Krusell, Per, 2007. "Growth accounting with investment-specific technological progress: A discussion of two approaches," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1300-1310, May.
    19. Diego Martínez, y José L. Torres & Jesús Rodríguez-López & José L. Torres, 2008. "Productivity growth and technological change in Europe and us," Economic Working Papers at Centro de Estudios Andaluces E2008/12, Centro de Estudios Andaluces.

    More about this item

    Keywords

    Intermediate goods; investment-specific technical change; growth accounting; gross output; multisector growth models;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:19579. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.