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Interpreting productivity growth in the new economy: Some agnostic notes

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  • Gundlach, Erich

Abstract

The growth rate of total factor productivity seems to have increased recently, at least in the United States. Higher US productivity growth may justify higher stock market valuations than in the past and thus herald an emerging New Economy. However, the size of the estimated growth rate of total factor productivity depends on an assumption about the factor-augmenting properties of technological change. Simulations based on alternative properties of technological change produce a wide range of implied stock market valuations. As long as the rate of technological change cannot be observed directly, justifying the emergence of a New Economy with residual measures of total factor productivity growth will prove to be a futile exercise.

Suggested Citation

  • Gundlach, Erich, 2001. "Interpreting productivity growth in the new economy: Some agnostic notes," Kiel Working Papers 1020, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkwp:1020
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    File URL: https://www.econstor.eu/bitstream/10419/2523/1/kap1020.pdf
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    References listed on IDEAS

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    1. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
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    3. Barro, Robert J, 1999. "Notes on Growth Accounting," Journal of Economic Growth, Springer, vol. 4(2), pages 119-137, June.
    4. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    5. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
    6. Michael J. Boskin & Lawrence J. Lau, 2000. "Generalized Solow-Neutral Technical Progress and Postwar Economic Growth," NBER Working Papers 8023, National Bureau of Economic Research, Inc.
    7. David Gruen & Glenn Stevens, 2000. "Australian Macroeconomic Performances and Policies in the 1990s," RBA Annual Conference Volume,in: David Gruen & Sona Shrestha (ed.), The Australian Economy in the 1990s Reserve Bank of Australia.
    8. Charles R. Hulten, 2000. "Total Factor Productivity: A Short Biography," NBER Working Papers 7471, National Bureau of Economic Research, Inc.
    9. Nelson, Richard R, 1973. "Recent Exercises in Growth Accounting: New Understanding or Dead End?," American Economic Review, American Economic Association, vol. 63(3), pages 462-468, June.
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    Cited by:

    1. Gern, Klaus-Jürgen & Gottschalk, Jan & Kamps, Christophe & Sander, Birgit & Scheide, Joachim & Strauß, Hubert, 2001. "Deutliche Abkühlung der Weltkonjunktur," Open Access Publications from Kiel Institute for the World Economy 2572, Kiel Institute for the World Economy (IfW).
    2. Piazolo, Daniel, 2001. "The New Economy and the International Regulatory Framework," Kiel Working Papers 1030, Kiel Institute for the World Economy (IfW).
    3. Klodt, Henning, 2001. "Die neue Ökonomie: Aufbruch und Umbruch," Open Access Publications from Kiel Institute for the World Economy 2575, Kiel Institute for the World Economy (IfW).
    4. Mc Quinn, Kieran, 2003. "Dynamic Factor Demands in a Changing Economy: An Irish Application," Research Technical Papers 3/RT/03, Central Bank of Ireland.

    More about this item

    Keywords

    technological change; total factor productivity growth;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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