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The Measurement of Growth under Embodied Technical Change

Author

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  • Omar LICANDRO
  • Javier RUIZ-CASTILLO
  • Jorge DURAN

Abstract

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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Suggested Citation

  • Omar LICANDRO & Javier RUIZ-CASTILLO & Jorge DURAN, 2001. "The Measurement of Growth under Embodied Technical Change," Economics Working Papers ECO2001/14, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2001/14
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    Cited by:

    1. Boucekkine, Raouf & del Rio, Fernando & Licandro, Omar, 2005. "Obsolescence and modernization in the growth process," Journal of Development Economics, Elsevier, vol. 77(1), pages 153-171, June.
    2. Jorge Duran & Omar Licandro, 2013. "Is the GDP growth rate in NIPA a welfare measure?," 2013 Meeting Papers 191, Society for Economic Dynamics.
    3. Felbermayr Gabriel J & Licandro Omar, 2005. "The Underestimated Virtues of the Two-sector AK Model," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-19, September.
    4. Gabriel J Felbermayr & Omar Licandro, 2002. "Embodied technical change in a two-sector AK model," Macroeconomics 0210001, University Library of Munich, Germany.
    5. Jorge Durán & Omar Licandro, 2025. "Is the output growth rate in NIPA a welfare measure?," The Economic Journal, Royal Economic Society, vol. 135(665), pages 119-143.
    6. Duernecker, Georg & Herrendorf, Berthold & Valentinyi, Ákos, 2021. "The productivity growth slowdown and Kaldor’s growth facts," Journal of Economic Dynamics and Control, Elsevier, vol. 130(C).
    7. Gosselin, Pierre & Lotz, Aïleen & Wambst, Marc, 2016. "How To Spend It? Capital Accumulation in a Changing World," MPRA Paper 71665, University Library of Munich, Germany.
    8. Schubert, Torben & Neuhäusler, Peter, 2018. "Can depleting technological opportunities explain the stagnation of productivity? Panel data evidence for 11 OECD countries," Studien zum deutschen Innovationssystem 11-2018, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin.
    9. Ricardo Azevedo, Araujo & Joanilio Rodolpho, Teixeira, 2010. "Investment Specific Technological Progress and Structural Change," MPRA Paper 53672, University Library of Munich, Germany.
    10. Bianco, Dominique, 2007. "An Endogenous Growth Model with Embodied Technical Change without Scale Effects," MPRA Paper 6571, University Library of Munich, Germany, revised 04 Jan 2008.

    More about this item

    JEL classification:

    • 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
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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