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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.

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File URL: http://eprints.lse.ac.uk/19579/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 19579.

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Length: 20 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:ehl:lserod:19579
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Keywords: Intermediate goods; investment-specific technical change; growth accounting; gross output; multisector growth models;

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Find related papers by 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

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  1. Mirko Draca & Stephen Machin & Robert Witt, 2008. "Panic on the Streets of London: Police, Crime and the July 2005 Terror Attacks," CEP Discussion Papers dp0852, Centre for Economic Performance, LSE.
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  7. repec:ucp:bknber:9780226304557 is not listed on IDEAS
  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.
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  13. L. Rachel Ngai & Roberto M. Samaniego, 2008. "Mapping Prices into Productivity in Multisector Growth Models," CEP Discussion Papers dp0869, Centre for Economic Performance, LSE.
  14. Chris Pissarides, 2008. "Employment Outcomes in the Welfare State," 2008 Meeting Papers 1096, Society for Economic Dynamics.
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