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Trend breaks and the long-run implications of investment-specific technological progress

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  • Alban Moura

Abstract

I update the Greenwood, Hercowitz, and Krusell (1997, GHK) decomposition of U.S. growth into contributions from neutral and investment-specific (IS) technological progress. I allow the decomposition to vary across sub-samples, reflecting the presence of trend breaks in the data. The estimates show strong heterogeneity across periods: while neutral technological progress explained virtually all growth between 1950 and the mid-1970s, IS technological progress accounts for 75% of growth since the 1980s. These results paint a more complex picture of postwar U.S. growth than GHK’s original decomposition and call for a better understanding of the 1970s productivity shifts.

Suggested Citation

  • Alban Moura, 2023. "Trend breaks and the long-run implications of investment-specific technological progress," Applied Economics Letters, Taylor & Francis Journals, vol. 30(16), pages 2270-2275, September.
    • Handle: RePEc:taf:apeclt:v:30:y:2023:i:16:p:2270-2275
    DOI: 10.1080/13504851.2022.2096855
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    1. Alban Moura, 2018. "Investment Shocks, Sticky Prices, and the Endogenous Relative Price of Investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 27, pages 48-63, January.
    2. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 413-451, June.
    3. Alban Moura, 2018. "Investment Shocks, Sticky Prices, and the Endogenous Relative Price of Investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 27, pages 48-63, January.
    4. Zhongjun Qu & Pierre Perron, 2007. "Estimating and Testing Structural Changes in Multivariate Regressions," Econometrica, Econometric Society, vol. 75(2), pages 459-502, March.
    5. Whelan, Karl, 2003. "A Two-Sector Approach to Modeling U.S. NIPA Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 627-656, August.
    6. Fernald, John G., 2007. "Trend breaks, long-run restrictions, and contractionary technology improvements," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2467-2485, November.
    7. Benati, Luca, 2014. "Do TFP and the relative price of investment share a common I(1) component?," Journal of Economic Dynamics and Control, Elsevier, vol. 45(C), pages 239-261.
    8. Margaret M. McConnell & Gabriel Perez-Quiros, 2000. "Output fluctuations in the United States: what has changed since the early 1980s?," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    9. Moura, Alban, 2021. "Are neutral and investment-specific technology shocks correlated?," European Economic Review, Elsevier, vol. 139(C).
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    1. Prados de la Escosura, Leandro & Rodríguez-Caballero, C. Vladimir, 2022. "War, pandemics, and modern economic growth in Europe," Explorations in Economic History, Elsevier, vol. 86(C).

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    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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