Discussion Paper Details

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Title: Mapping prices into productivity in multisector growth models

Author(s): Liwa Rachel Ngai and Roberto Samaniego

Publication Date: June 2009

Keyword(s): growth accounting, Intermediate goods, investment-specific technical change, multisector growth models and value added

Programme Area(s): International Macroeconomics

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 the productivity indices for value added and for gross output. We illustrate their significance for growth accounting using 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 account for the composition of intermediates, we find that ISTC accounts for an even greater share of post-war US growth.

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Bibliographic Reference

Ngai, L and Samaniego, R. 2009. 'Mapping prices into productivity in multisector growth models'. London, Centre for Economic Policy Research.