Abstract for:

Mapping Prices into Productivity in Multisector Growth Models

L. Rachel  Ngai,  Roberto M.  Samaniego,  May 2008
Paper No' CEPDP0869: | Full paper

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Keywords: Intermediate goods; investment-specific technical change, growth accounting, gross output, multisector growth models

JEL Classification: E13; O30; O41; O47

Is hard copy/paper copy available? YES - Paper Copy Still In Print.

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This Paper is published under the following series: CEP Discussion Papers

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Abstract:

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.