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CEP discussion paper

Mapping Prices into Productivity in Multisector Growth Models


Two issues related to mapping a multi-sector model into a reduced-form value-added model are often neglected: the composition of intermediate goods, and the distinction between value added productivity and gross output productivity. We demonstrate their quantitative significance for the case of the well known model of Greenwood, Hercowitz and Krusell (1997), who find that about 60% of economic growth can be attributed to investment-specific technical change (ISTC). When we recalibrate their model to allow for even a small equipment share of intermediates, we find that ISTC accounts for almost the entirety of postwar US growth.


L. Rachel Ngai and Roberto M. Samaniego

May 2008     Paper Number CEPDP0869

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This CEP discussion paper is published under the centre's programme.