Some Implications of Using Prices to Measure Productivity in a Two-Sector Growth Model

Milton Marquis and Bharat Trehan ()

No 2001-10, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: A two-sector growth model is used to study U.S. productivity growth since the 1960s. Sector-specific measures of productivity are constructed by imposing theoretical restrictions from this model on data on factor prices and the relative price of capital. Under the identifying restriction that capital-specific productivity growth be orthogonal to economy-wide productivity growth, shifts in TFP growth can be explained in terms of an economy-wide productivity growth slowdown in the mid-1970s and an acceleration in productivity growth in the capital goods sector in the mid-1990s. Also, interpreting changes in the relative price of capital as capital-specific technological change implies a theoretical restriction on the productivity processes that is rejected by our data.

Keywords: Prices; Productivity (search for similar items in EconPapers)
Pages: 33
Date: 2003-07-01
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DOI: 10.24148/wp2001-10

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