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Endogenous Productivity and Development Accounting

  • Roc Armenter
  • Amartya Lahiri

    ()

    (Economics University of British Columbia)

We model an environment in which different vintages of capital with their different productivities coexist. A reduction in the cost of investment induces investment in new capital which raises both measured capital and measured productivity simultaneously. We calibrate this model to cross-country data on the price of investment goods and compare the resultant world distribution of per capita income with the actual distribution in the data. We find that the model does fairly well in quantitatively accounting for the observed dispersion in world income. In particular, the model generates 35-fold income gaps and 6-fold productivity differences between the richest and poorest countries in our sample

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 268.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:268
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  1. Daron Acemoglu & Jaume Ventura, 2001. "The World Income Distribution," NBER Working Papers 8083, National Bureau of Economic Research, Inc.
  2. Simon Gilchrist & John C. Williams, 2001. "Transition Dynamics in Vintage Capital Models: Explaining the Postwar Catch-up of Germany and Japan," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-113, Boston University - Department of Economics.
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  13. Caselli, Francesco & Wilson, Daniel J., 2004. "Importing technology," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 1-32, January.
  14. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1997. "The poverty of nations: a quantitative exploration," Staff Report 204, Federal Reserve Bank of Minneapolis.
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  17. Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
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