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Sources of U.S. Economic Growth in a World of Ideas

  • Charles I. Jones

September 24, 1999 -- Version 4.0 At least since 1950, the U.S. economy has benefited from increases in educational attainment, increases in research intensity, and the increased openness and development of the world economy. Such changes suggest, contrary to the conventional view, that the U.S. economy is far from its steady-state balanced growth path. This paper develops a model in which these facts are reconciled with the stability of average U.S. growth rates over the last century. In the model, long-run growth is driven by the worldwide discovery of new ideas, which in turn is tied to world population growth. Nevertheless, a constant growth path can temporarily be maintained at a rate greater than the long-run rate provided research intensity and educational attainment rise steadily over time. Growth accounting with this model reveals that 35 percent of U.S. growth between 1965 and 1990 is attributable to the rise in educational attainment, more than 40 percent is attributable to the rise in worldwide research intensity, and only about 25 percent is due to the long-run component of growth related to the increase in world population. This is a substantially revised version of a previous paper, "The Upcoming Slowdown in U.S. Economic Growth."

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Paper provided by Stanford University, Department of Economics in its series Working Papers with number 98009.

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  1. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  2. Danny Quah, 1996. "The invisible hand and the weightless economy," LSE Research Online Documents on Economics 2271, London School of Economics and Political Science, LSE Library.
  3. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  4. McGrattan, Ellen R. & Schmitz, James Jr., 1999. "Explaining cross-country income differences," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 10, pages 669-737 Elsevier.
  5. William D. Nordhaus, 1969. "An Economic Theory of Technological Change," Cowles Foundation Discussion Papers 265, Cowles Foundation for Research in Economics, Yale University.
  6. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  7. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  8. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-70, August.
  9. Ben-David, Dan & Papell, David H., 1995. "The great wars, the great crash, and steady state growth: Some new evidence about an old stylized fact," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 453-475, December.
  10. Griliches, Zvi, 1988. "Productivity Puzzles and R&D: Another Nonexplanation," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 9-21, Fall.
  11. Danny Quah, 1996. "The Invisible Hand and the Weightless Economy," CEP Occasional Papers 12, Centre for Economic Performance, LSE.
  12. West, Kenneth D, 1988. "Asymptotic Normality, When Regressors Have a Unit Root," Econometrica, Econometric Society, vol. 56(6), pages 1397-1417, November.
  13. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
  14. Claudia Goldin, 1999. "A Brief History of Education in the United States," NBER Historical Working Papers 0119, National Bureau of Economic Research, Inc.
  15. 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.
  16. Edmond S. Phelps, 1964. "Models of Technical Progress and the Golden Rule of Research," Cowles Foundation Discussion Papers 176, Cowles Foundation for Research in Economics, Yale University.
  17. David, Paul A., 1977. "Invention and accumulation in america's economic growth: A nineteenth-century parable," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 6(1), pages 179-228, January.
  18. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
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