Is Growth Additive?

Callum Jones, David López-Salido and Thomas Philippon
Additional contact information
Callum Jones: Federal Reserve Board
David López-Salido: Banco de España and CEPR
Thomas Philippon: New York University Stern School of Business, CEPR and NBER

No 2630, Working Papers from Banco de España

Abstract: Growth theory is based on the assumption of exponential total factor productivity (TFP) growth, in other words, that the conditional expectation of the next TFP increment is proportional to the current level of TFP. In the United States, we find strong evidence that TFP growth is conditionally additive, not exponential. Even starting from low priors, Bayesian estimation selects the additive model over the exponential one. In addition, professional forecasts and international TFP series are consistent with the additive model but not with the exponential one.

Keywords: growth theory; TFP; additive growth (search for similar items in EconPapers)
JEL-codes: C10 E17 N0 O11 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2026-09
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2630e

DOI: 10.53479/44425

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