Kiel Working Papers, Kiel Institute for World Economics
No 1020:
Interpreting Productivity Growth in the New Economy: Some Agnostic Notes
Erich Gundlach
Abstract: The growth rate of total factor productivity seems to have
increased recently, at least in the United States. Higher US productivity
growth may justify higher stock market valuations than in the past and thus
herald an emerging New Economy. However, the size of the estimated growth
rate of total factor productivity depends on an assumption about the
factor-augmenting properties of technological change. Simulations based on
alternative properties of technological change produce a wide range of
implied stock market valuations. As long as the rate of technological
change cannot be observed directly, justifying the emergence of a New
Economy with residual measures of total factor productivity growth will
prove to be a futile exercise.
Keywords: Total factor productivity growth, technological change; (follow links to similar papers)
JEL-Codes: O47; (follow links to similar papers)
28 pages, January 2001
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