Investment-Specific and Multifactor Productivity in Multi-Sector Open Economies:Data and Analysis

Luca Guerrieri and Dale Henderson

No 143, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: In the last half of the 1990s, labor productivity growth rose in the U.S. and fell almost everywhere in Europe. We document changes in both capital deepening and multifactor productivity (MFP) growth in both the information and communication technology (ICT) and non-ICT sectors. We view MFP growth in the ICT sector as investment-specific productivity (ISP) growth. We perform simulations suggested by the data using a two-country DGE model with traded and nontraded goods. For ISP, we consider level increases and persistent growth rate increases that are symmetric across countries and allow for costs of adjusting capital-labor ratios that are higher in one country because of structural differences. ISP increases generate investment booms unless adjustment costs are too high. For MFP, we consider persistent growth rate shocks that are asymmetric. When such MFP shocks affect only traded goods (as often assumed), movements in `international' variables are qualitatively similar to those in the data. However, when they also affect nontraded goods (as suggested by the data), movements in some of the variables are not. To obtain plausible results for the growth rate shocks, it is necessary to assume slow recognition

Keywords: Technology Shocks; DGE Models; Learning (search for similar items in EconPapers)
JEL-codes: D83 F43 O41 (search for similar items in EconPapers)
Date: 2005-11-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Working Paper: Investment-specific and multifactor productivity in multi-sector open economies: data and analysis (2005)
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