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Dynamic Adjustments to Terms of Trade Shocks: The USA Productivity Boom and Australia

  • Richard G. Harris

    ()

    (Department of Economics, Simon Fraser University)

  • Peter E. Robertson

    ()

    (School of Economics, The University of New South Wales)

How has the USA’s “new economy” productivity boom affected Australia? We consider this question using a dynamic multi-sector growth model of the Australian and USA economies. We find that productivity growth in the USA durables sector generates small but important gains to Australia. We find that the transmission of growth is generated through increased export demand for Agriculture. Consequently we find that the USA’s productivity growth tends to favour Australia’s traditional export sectors. Likewise it increases the relative demand for less skilled labour in Australia and reduces the demand for skilled labour and higher education.

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File URL: http://wwwdocs.fce.unsw.edu.au/economics/Research/WorkingPapers/2007_16.pdf
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Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2007-16.

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Length: 31 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:swe:wpaper:2007-16
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  1. Lee, Jong-Wha, 1995. "Capital goods imports and long-run growth," Journal of Development Economics, Elsevier, vol. 48(1), pages 91-110, October.
  2. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  3. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, September.
  4. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
  5. Dean Parham, 2004. "Sources of Australia's Productivity Revival," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 239-257, 06.
  6. Dew-Becker, Ian & Gordon, Robert J, 2005. "Where did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income," CEPR Discussion Papers 5419, C.E.P.R. Discussion Papers.
  7. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
  8. No authors listed, 2001. "New Economy," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 27(1), pages 1-9.
  9. Eaton, Jonathan & Kortum, Samuel, 2001. "Trade in capital goods," European Economic Review, Elsevier, vol. 45(7), pages 1195-1235.
  10. Bart van Ark & Robert Inklaar & Robert H. McGuckin, 2003. "The Contribution of ICT-Producing and ICT-Using Industries to Productivity Growth: A Comparison of Canada, Europe and the United States," International Productivity Monitor, Centre for the Study of Living Standards, vol. 6, pages 56-63, Spring.
  11. William D. Nordhaus, 2001. "Productivity Growth and the New Economy," NBER Working Papers 8096, National Bureau of Economic Research, Inc.
  12. J. Bradford DeLong & Lawrence H. Summers, 1992. "Equipment Investment and Economic Growth: How Strong Is the Nexus?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 157-212.
  13. Karnit Flug & Zvi Hercowitz, 2000. "Equipment Investment and the Relative Demand for Skilled Labor: International Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 461-485, July.
  14. Barry Eichengreen, 2004. "Productivity Growth, the New Economy, and Catching Up," Review of International Economics, Wiley Blackwell, vol. 12(2), pages 243-245, 05.
  15. Ian Dew-Becker & Robert J. Gordon, 2005. "Where Did Productivity Growth Go? Inflation Dynamics and the Distribution of Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2), pages 67-150.
  16. Restuccia, Diego & Urrutia, Carlos, 2001. "Relative prices and investment rates," Journal of Monetary Economics, Elsevier, vol. 47(1), pages 93-121, February.
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