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Accounting for Growth With New Inputs

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  • Robert C. Feenstra
  • James R. Markusen

Abstract

In this paper we examine how to account for growth when new inputs are being created. In particular, we obtain a decomposition of growth into that due to a higher quantity of existing inputs, and that due to a greater range of inputs. This decomposition is first obtained for a single firm, with a CES production function. We then generalize to the GNP function of an economy. and again show how a decomposition of growth in GNP can be obtained. An example is presented of a two-sector economy, where new inputs are endogenously created each period, and a simple aggregate production function exists. Data for this economy are simulated, and the GNP function is estimated using various different measures of the factor inputs.

Suggested Citation

  • Robert C. Feenstra & James R. Markusen, 1992. "Accounting for Growth With New Inputs," NBER Working Papers 4114, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4114
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    1. Feenstra & R.C., 1990. "New Goods and Index Members: U.S. Import Prices," Papers 371, California Davis - Institute of Governmental Affairs.
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