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Growth And Capital Deepening Since 1870: Is It All Technological Progress?

  • Jakob B. Madsen

Based on an asset pricing model this paper shows that traditional growth accounting exercises attribute too much weight to capital deepening and suggests a method to filter out TFP-induced capital-deepening from the estimates. Using data for 16 industrialised countries, it is shown that labour productivity and capital deepening have been driven by total factor productivity and reductions in the required stock returns over the past 137 years. Furthermore, it is shown that TFP precedes the K-L ratio and not the other way around.

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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 10-09.

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Length: 36 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:mos:moswps:2009-10
Contact details of provider: Postal: Department of Economics, Monash University, Victoria 3800, Australia
Phone: +61-3-9905-2493
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  9. Madsen, Jakob B., 2010. "Growth and capital deepening since 1870: Is it all technological progress?," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 641-656, June.
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