GROWTH ACCOUNTING IN ECONOMIC HISTORY: FINDINGS, LESSONS AND NEW DIRECTIONS

Nicholas Crafts and Pieter Woltjer

Journal of Economic Surveys, 2021, vol. 35, issue 3, 670-696

Abstract: There is now a large volume of growth accounting estimates covering the long run experience of advanced countries. However, most of the studies in economic history are not based on state‐of‐the‐art methods. There is a trade‐off between maintaining international comparability and achieving the best results for individual countries. A one‐size‐fits‐all approach will not always do justice to the variety of historical experiences since the conventional assumptions may sometimes be inappropriate. Nevertheless, growth‐accounting studies have produced some eye‐catching results which provide food for thought both for economic historians and for growth economists. These include (1) the finding that TFP growth was comparatively slow during the First Industrial Revolution, (2) Solow's famous conclusion that TFP growth accounted for 7/8ths of American labour‐productivity growth was atypical, (3) the impact of new general‐purpose technologies on growth typically takes a long time to materialize, ICT being the notable exception and (4) that capital‐deepening was much more important relative to TFP growth in east Asian than in western European catch‐up growth. Growth accounting is undoubtedly a valuable item in the cliometrician's toolkit. Nonetheless, we anticipate the introduction of more sophisticated methods and look forward to progress in understanding what explains marked differences in TFP performance.

Date: 2021
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