Interpreting Productivity Growth in the New Economy: Some Agnostic Notes

Kiel Institute of World Econ Working Paper No. 1020

28 Pages Posted: 12 Feb 2001  

Erich Gundlach

University of Hamburg

Date Written: January 2001

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

JEL Classification: 0 47

Suggested Citation

Gundlach, Erich, Interpreting Productivity Growth in the New Economy: Some Agnostic Notes (January 2001). Kiel Institute of World Econ Working Paper No. 1020. Available at SSRN: https://ssrn.com/abstract=257599 or http://dx.doi.org/10.2139/ssrn.257599

Erich Gundlach (Contact Author)

University of Hamburg ( email )

Department of Economics
Von-Melle-Park 5
Hamburg, 20146
Germany
+49 40 428384589 (Phone)

HOME PAGE: http://www.erichgundlach.de

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