Investment-Specific and Multi-Factor Productivity in Multi-Sector Open Economies: Data and Analysis

Seoul Journal of Economics 2017, Vol. 30, No. 3

40 Pages Posted: 31 Aug 2017

See all articles by Luca Guerrieri

Luca Guerrieri

Federal Reserve Board - Trade and Financial Studies

Dale W. Henderson

Federal Reserve Board

Jinill Kim

Korea University

Date Written: August 30, 2017

Abstract

In the second half of the 1990s, labor productivity growth rose in the United States and declined in most parts of Europe. This paper documents changes in capital deepening and multi-factor productivity (MFP) growth in information and communication technology (ICT) and non-ICT sectors. We consider MFP growth in the ICT sector as investment-specific productivity (ISP) growth. We perform simulations suggested by the data by adopting a two-country dynamic general equilibrium model with traded and non-traded goods. For ISP, we consider level increases and persistent growth rate increases that are symmetric across countries and allow for costs of adjusting capital-labor ratios that are considerably high in one country because of structural differences. Investment-specific productivity increases generated investment booms unless adjustment costs are excessively high. For MFP, we consider persistent growth rate shocks that are asymmetric. When these MFP shocks affect only traded goods (as commonly assumed), movements in “international” variables are qualitatively similar to those in the data. However, when such shocks also affect non-traded goods (as suggested by the data), movements in some of the variables are not qualitatively similar to those in the data. For the acquisition of plausible results for the growth rate shocks, slow recognition needs to be taken into account.

Keywords: Technological shocks, Technical change, Dynamic, General Equilibrium, Learning, Harrod–Balassa–Samuelson Effect, Nontraded goods

JEL Classification: D83, F43, O41

Suggested Citation

Guerrieri, Luca and Henderson, Dale W. and Kim, Jinill, Investment-Specific and Multi-Factor Productivity in Multi-Sector Open Economies: Data and Analysis (August 30, 2017). Seoul Journal of Economics 2017, Vol. 30, No. 3 . Available at SSRN: https://ssrn.com/abstract=3029025

Luca Guerrieri

Federal Reserve Board - Trade and Financial Studies ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2550 (Phone)

Dale W. Henderson

Federal Reserve Board ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2343 (Phone)
202-736-5638 (Fax)

Jinill Kim (Contact Author)

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701

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