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Input Price Shocks and the Slowdown in Economic Growth: The Case of U.K.Manufacturing

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  • Michael Bruno
  • Jeffrey Sachs
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    Abstract

    This paper provides a theoretical and empirical analysis of the effects of input price shocks on economic growth, with a focus on United Kingdom manufacturing in the 1970s. The theoretical model predicts a discrete decline in out- put and productivity after an input price rise, and a longer-run slowdown in productivity growth, real wage growth, and capital accumulation. These features characterize the United Kingdom and most other OECD economies after 1973. The empirical results confirm the important role of input prices in recent U.K. adjustment, but also point to an important role for other supply and demand factors.

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    File URL: http://www.nber.org/papers/w0851.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0851.

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    Date of creation: Feb 1982
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    Publication status: published as Bruno, Micahel and Jeffrey Sachs. "Input Price Shocks and the Slowdown in Economic Growth: The Case of U.K. Manufacturing." Review of Economic Studies , Vol. 51, No. 159, (1982), pp. 679-706.
    Handle: RePEc:nbr:nberwo:0851
    Note: ITI IFM
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    1. Oulton, Nicholas, 1981. "Aggregate Investment and Tobin's Q: The Evidence from Britain," Oxford Economic Papers, Oxford University Press, vol. 33(2), pages 177-202, July.
    2. Bruno, Michael & Sachs, Jeffrey, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 845-59, Special I.
    3. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
    4. Thomas J. Sargent, 1978. "Estimation of dynamic labor demand schedules under rational expectations," Staff Report 27, Federal Reserve Bank of Minneapolis.
    5. Oulton, Nicholas, 1978. "Explaining aggregate investment in Britain : The importance of Tobin's Q," Economics Letters, Elsevier, vol. 1(3), pages 253-257.
    6. Poterba, James M. & Summers, Lawrence H., 1983. "Dividend taxes, corporate investment, and `Q'," Journal of Public Economics, Elsevier, vol. 22(2), pages 135-167, November.
    7. Jeffrey D. Sachs, 1979. "Wages, Profits, and Macroeconomic Adjustment: A Comparative Study," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 269-332.
    8. Grubb, David B & Jackman, Richard A & Layard, Richard G, 1982. "Causes of the Current Stagflation," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 707-30, Special I.
    9. Berndt, Ernst R & Wood, David O, 1979. "Engineering and Econometric Interpretations of Energy-Capital Complementarity," American Economic Review, American Economic Association, vol. 69(3), pages 342-54, June.
    10. Michael Bruno & Jeffrey Sachs, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," NBER Working Papers 0852, National Bureau of Economic Research, Inc.
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