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Sectoral Solow residuals

  • Craig Burnside
  • Martin Eichenbaum
  • Sergio Rebelo

This paper presents capital utilization corrected measures of technology shocks for aggregate and disaggregated (two digit Standard Industrial Classification code) industries. We correct for variations in capital utilization by employing industrial electrical use as a measure of capital services. In contrast, the standard measures of technology shocks used in the Real Business Cycle literature are based on economy wide data and assume that capital services are proportional to the stock of measured capital. To assess the impact of these differences, we contrast selected properties of the competing technology shock measures. We argue that the properties of technology shocks for the manufacturing sector are quite different than those used in the RBC literature. We also find that correcting for capital utilization has important implications for the properties of the Solow residual.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series, Macroeconomic Issues with number 95-15.

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Date of creation: 1995
Date of revision:
Handle: RePEc:fip:fedhma:95-15
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  1. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sérgio, 1995. "Capital Utilization and Returns to Scale," CEPR Discussion Papers 1221, C.E.P.R. Discussion Papers.
  2. Burnside, Craig & Eichenbaum, Martin, 1996. "Factor-Hoarding and the Propagation of Business-Cycle Shocks," American Economic Review, American Economic Association, vol. 86(5), pages 1154-74, December.
  3. Basu, S., 1993. "Procyclical Productivity: Overhead Inputs or Cyclical Utilization," Papers 93-25, Michigan - Center for Research on Economic & Social Theory.
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