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Transition Dynamics in Vintage Capital Models: Explaining the Postwar Catch-Up of Germany and Japan

  • Simon Gilchrist
  • John C. Williams

We consider a neoclassical interpretation of Germany and Japan's rapid postwar growth that relies on a catch-up mechanism through capital accumulation where technology is embodied in new capital goods. Using a putty-clay model of production and investment, we are able to capture many of the key empirical properties of Germany and Japan's postwar transitions, including persistently high but declining rates of labor and total-factor productivity growth, a U-shaped response of the capital-output ratio, rising rates of investment and employment, and moderate rates of return to capital.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10732.

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Date of creation: Sep 2004
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Handle: RePEc:nbr:nberwo:10732
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  1. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  2. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-62, June.
  3. Simon Gilchrist & John C. Williams, 2000. "Putty-Clay and Investment: A Business Cycle Analysis," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 928-960, October.
  4. Kydland, Finn E & Prescott, Edward C, 1991. "Hours and Employment Variation in Business Cycle Theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 1(1), pages 63-81, January.
  5. Jeremy Greenwood & Boyan Jovanovic, 2000. "Accounting for Growth," RCER Working Papers 475, University of Rochester - Center for Economic Research (RCER).
    • Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, in: New Developments in Productivity Analysis, pages 179-224 National Bureau of Economic Research, Inc.
  6. Jonathan Eaton & Samuel Kortum, 1995. "Engines of Growth: Domestic and Foreign Sources of Innovation," Boston University - Institute for Economic Development 63, Boston University, Institute for Economic Development.
  7. Alvarez-Cuadrado, Francisco, 2008. "Growth outside the stable path: Lessons from the European reconstruction," European Economic Review, Elsevier, vol. 52(3), pages 568-588, April.
  8. Lawrence J. Christiano, 1989. "Understanding Japan's saving rate: the reconstruction hypothesis," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 10-25.
  9. Charles R. Hulten, 1991. "Productivity Growth in Japan and the United States," NBER Books, National Bureau of Economic Research, Inc, number hult91-1, June.
  10. Ray C. Fair & John B. Taylor, 1980. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Cowles Foundation Discussion Papers 564, Cowles Foundation for Research in Economics, Yale University.
  11. King, R.G. & Rebelo, S.T., 1989. "Transitional Dynamics And Economic Growth In The Neoclassical Model," RCER Working Papers 206, University of Rochester - Center for Economic Research (RCER).
  12. Charles R. Hulten, 1991. "Introduction to "Productivity Growth in Japan and the United States"," NBER Chapters, in: Productivity Growth in Japan and the United States, pages 1-27 National Bureau of Economic Research, Inc.
  13. Fumio Hayashi, 1989. "Is Japan's saving rate high?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-9.
  14. Wolff, Edward N, 1996. "The Productivity Slowdown: The Culprit at Last? Follow-Up on Hulten and Wolff," American Economic Review, American Economic Association, vol. 86(5), pages 1239-52, December.
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