What Is Driving The TFP Slowdown? Insights From a Schumpeterian DSGE Model

Marco Pinchetti

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, I incorporate a Schumpeterian mechanism of creative destruction in a medium-scale DSGE framework. In the model, a sector of profit-maximizing innovators invests in R&D and endogenously gen- erates productivity gains, ultimately determining the economy's growth rate. I estimate the model using Bayesian methods on U.S. data of the last 25 years (1993q1-2018q4) in order to disentangle the key forces underlying the productivity slowdown experienced by the US economy since the early 2000s. In contrast with the previous literature, I exploit Fernald (2014) data on TFP, factor utilization and labour quality to discipline the production function, and find that the bulk of the TFP slowdown is due to a decrease in innovation's ability to generate TFP gains. These findings challenge the view of a large part of the literature, according to which the recent TFP dynamics in the US are mostly driven by demand slumps and/or liquidity crunches.

Keywords: DSGE model; Endogenous TFP; Schumpeterian Growth; TFP Slowdown (search for similar items in EconPapers)
JEL-codes: E24 E32 E5 O47 (search for similar items in EconPapers)
Date: 2020-01-24
New Economics Papers: this item is included in nep-dge, nep-eff, nep-ino and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/98316/1/MPRA_paper_98316.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:98316

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().