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Accounting for Growth with New Inputs

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  • Feenstra, Robert C
  • Markusen, James R

Abstract

This paper examines the aggregate production function in an economy characterized by the creation of new, intermediate inputs. The authors show how growth can be decomposed into changes in higher quantities of existing inputs and a greater range of inputs. Indexes of total factor productivity would reflect the latter. The authors construct a dynamic monopolistic-competition model in which products are endogenously introduced and simulate that model to produce artificial data. When used in standard growth-accounting regressions, the data can appear to be generated by an economy with exogenous technical change and (approximately) constant returns to primary factors. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Feenstra, Robert C & Markusen, James R, 1994. "Accounting for Growth with New Inputs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 429-447, May.
    • Handle: RePEc:ier:iecrev:v:35:y:1994:i:2:p:429-47
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    1. D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(3), pages 249-283.
    2. Feenstra, Robert C & Markusen, James R & Zeile, William, 1992. "Accounting for Growth with New Inputs: Theory and Evidence," American Economic Review, American Economic Association, vol. 82(2), pages 415-421, May.
    3. Feenstra & R.C., 1990. "New Goods and Index Members: U.S. Import Prices," Papers 371, California Davis - Institute of Governmental Affairs.
    4. Solow, Robert M, 1988. "Growth Theory and After," American Economic Review, American Economic Association, vol. 78(3), pages 307-317, June.
    5. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
    6. Benhabib, Jess & Jovanovic, Boyan, 1991. "Externalities and Growth Accounting," American Economic Review, American Economic Association, vol. 81(1), pages 82-113, March.
    7. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
    8. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    9. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-228, May.
    10. James R. Markusen, 1990. "First Mover Advantages, Blockaded Entry, And the Economics of Uneven Development," NBER Working Papers 3284, National Bureau of Economic Research, Inc.
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