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Accounting for Growth in the Age of the Internet: The Importance of Output-Saving Technical Change

Listed author(s):
  • Charles Hulten
  • Leonard Nakamura
Registered author(s):

    We extend the conventional Solow growth accounting model to allow innovation to affect consumer welfare directly. Our model is based on Lancaster’s New Approach to Consumer Theory, in which there is a separate “consumption technology” that transforms the produced goods, measured at production cost, into utility. This technology can shift over time, allowing consumers to make more efficient use of each dollar of income. This is “output-saving” technical change, in contrast to the Solow TFP “resource-saving” technical change. One implication of our model is that living standards can rise at a greater rate than real GDP growth.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23315.

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    Date of creation: Apr 2017
    Handle: RePEc:nbr:nberwo:23315
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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Greenstein, Shane & McDevitt, Ryan C., 2011. "The broadband bonus: Estimating broadband Internet's economic value," Telecommunications Policy, Elsevier, vol. 35(7), pages 617-632, August.
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    14. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-980, September.
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    18. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Chapters,in: Resource and Output Trends in the United States Since 1870, pages 1-23 National Bureau of Economic Research, Inc.
    19. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
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