Capital Quality Improvement and the Sources of Growth in the Euro Area

34 Pages Posted: 2 Dec 2004

See all articles by Plutarchos Sakellaris

Plutarchos Sakellaris

University of Maryland - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Focco Vijselaar

affiliation not provided to SSRN

Date Written: April 2005

Abstract

The euro area experienced a slowdown in output and Total Factor Productivity growth in the 1990s compared to the 1980s. We ask the following questions. Is the apparent slowdown in euro area output due to a lack of proper accounting for capital quality improvement? The answer is no. Did technological change really slow down in the euro area? The answer here is mixed. The part of the technological change that is embodied in capital goods and boosts output through investment in these goods in fact accelerated in the 1990s. In contrast, disembodied technological change, which boosts output through new consumer goods or new production processes, decelerated in the 1990s more sharply than the official figures portray.

Keywords: output growth, embodied technological change, equipment investment, investment price deflators, euro area

JEL Classification: O30, O47

Suggested Citation

Sakellaris, Plutarchos and Vijselaar, Focco, Capital Quality Improvement and the Sources of Growth in the Euro Area (April 2005). CESifo Working Paper Series No. 1452; ECB Working Paper No. 368. Available at SSRN: https://ssrn.com/abstract=533128

Plutarchos Sakellaris (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Focco Vijselaar

affiliation not provided to SSRN

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