Are computers driving real wages down?

The annual growth in mean employee compensation plummeted from 2.6% in 1947–73 to 0.4% in 1973–2003. Using both time-series regression and pooled, cross-section, time-series regression analysis for 44 industries over the period 1953–2000, we find that earnings growth is positively related to overall productivity growth, capital investment excluding computers, and the unionization rate. We find also that computerization has a significant negative effect on earnings growth, but no evidence that the growth of skills or educational attainment has any statistically significant effect on earnings growth. The dominant factors explaining the slowdown in wage growth are decline in the unionization rate, slowdown in both TFP growth and overall capital investment, and acceleration in computer investment.     

Information aggregation and investment cycles with strategic complementarity

This paper studies the interaction between information aggregation and investment cycles with investments exhibiting strategic complementarity. The composition of information aggregation varies across different phases of cycles, which in turn affects the course of investment cycles. The phases of cycles are history dependent for informational reasons, and changes in phases depend on the growth rate of aggregate investment: a slowdown in growth is interpreted as bad news and a slowdown in downturn is considered as good news. A small structural change in low cost investments can have a large effect on the pattern of cycles. Investment cycles might be characterized by sudden crashes and slow recoveries.     

International spillovers,productivity growth and openness in Thailand: an intertemporal general equilibrium analysis

Thailand has experienced economic growth well above world averages from 1960 to the recent crisis. While the controversy over Thailand and East Asian growth has discussed the role of capital accumulation versus productivity, we analyze the general equilibrium interaction between productivity and investment in an intertemporal growth model. The high growth is understood as a prolonged transition path with gradual tariff reduction and endogenous productivity driven by foreign spillover feeding capital investment. Counterfactual analyses show how protection would have reduced growth with productivity and investment slowdown, while shock liberalization would have raised immediate growth with faster convergence to steady state.     

Financialisation and Real Investment in the European Union: Beneficial or Prejudicial Effects?

This article presents an empirical analysis of the relationship between financialisation and real investment for non-financial corporations using panel data composed of 27 European Union countries over 19 years (1995 to 2013). On the one hand, financialisation leads to a rise in financial investments, diverting funds from real investments (‘crowding out’ effect); on the other, pressures from shareholders to intensify financial payments restrict the funds available for new real investments. We estimate an aggregate investment equation with the traditional variables (lagged investment, profitability, debt, cost of capital, corporate savings and output growth) and two further measures of financialisation (financial receipts and financial payments). The findings demonstrate that financialisation has damaged real investment in European Union countries, mainly through the channel of financial payments, either by interest or dividend payments. It is also found that the prejudicial effects of financialisation on investment were more severe in the pre-2007 crisis period. It is concluded that financialisation contributed to a slowdown of real investment by 1 to 8 per cent in the full and pre-crisis period, respectively. During the pre-crisis period, financialisation was the main driver of the slowdown of investment in the European Union.     

Unemployment, growth and taxation in industrial countries

To the layman, the upward trend in European unemployment is related to the slowdown of economic growth. We argue that the layman's view is correct. The increase in European unemployment and the slowdown in economic growth are related, because they stem from a common cause: an excessively rapid growth in the cost of labour. In Europe, labour costs have gone up for many reasons, but one is particularly easy to identify: higher taxes on labour. If wages are set by strong and decentralized trade unions, an increase in labour taxes is shifted onto higher real wages. This has two effects. First, it reduces labour demand, and thus creates unemployment. Secondly, as firms substitute capital for labour, the marginal product of capital falls; over long periods of time, this in turn diminishes the incentive to invest and to grow. The data strongly support this view. According to our estimates, the observed rise of 14 percentage points in labour tax rates between 1965 and 1995 in the EU could account for a rise in EU unemployment of roughly 4 percentage points, a reduction of the investment share of output of about 3 percentage points, and a growth slowdown of about 0.4 percentage points a year.     

Balanced growth and structural breaks: evidence for Germany

One of the central hypotheses of the neoclassical growth literature is the balanced-growth hypothesis, which predicts that output, consumption and investment grow at the same rate. Empirically, this implies that the consumption-to-output ratio and the investment-to-output ratio must be stationary and that consumption and investment must be cointegrated with output. This article tests these implications with respect to Germany, using unit root tests and cointegration techniques that allow for an endogenously determined structural break. We find that the long-run growth path of the German economy is consistent with the balanced-growth hypothesis if we allow for a structural break associated with the worldwide productivity slowdown of the early 1970s.     

The vintage effect in TFP-growth: An analysis of the age structure of capital

The age structure of capital plays an important role in the measurement of productivity. It has been argued that the slowdown in the 1970s can be ascribed to the aging of the stock of capital. In this paper, we incorporate the age structure in productivity measurement. One proposition proves that Nelson's [Nelson, R.R., 1964. Aggregate production functions and medium-range growth projections. American Economic Review 54 (September), 575–605] formula is only an approximation. Our final proposition shows that inclusion of the vintage effect prompts an upward correction of measured productivity growth in times of an aging stock of capital. Here capital ages if the investment/capital ratio falls short of the inverse of the capital age, as a first proposition shows. The analysis rests on a rigorous accounting for vintages. We translate the Bureau of Economic Analysis’ age of capital data into a measure of rates of obsolescence. Empirically, the correction of productivity growth for the vintage effect requires an estimate of the obsolescence and depreciation parameters on the basis of age data. The results indicate that the use of capital stock in efficiency units does cause some smoothing of total factor productivity growth over time. In the 1950s, when investment accelerated, the vintage-adjusted capital growth rate well exceeded the BEA growth rate, and vintage-adjusted TFP-growth is significantly lower than unadjusted TFP-growth. The measured productivity slowdown of the 1970s is somewhat ameliorated.     

GLOBAL POPULATION GROWTH,TECHNOLOGY, AND MALTHUSIAN CONSTRAINTS: A QUANTITATIVE GROWTH THEORETIC PERSPECTIVE

We structurally estimate a two‐sector Schumpeterian growth model with endogenous population and finite land reserves to study the long‐run evolution of global population, technological progress, and the demand for food. The estimated model closely replicates trajectories for world population, GDP, sectoral productivity growth, and crop land area from 1960 to 2010. Projections from 2010 onward show a slowdown of technological progress, and, because it is a key determinant of fertility costs, significant population growth. By 2100, global population reaches 12.4 billion and agricultural production doubles, but the land constraint does not bind because of capital investment and technological progress.     

Sources of the German Productivity Demise: Tracing the Effects of Industry-Level Information and Communication Technology Investment

Abstract. While the United States experienced two successive labor productivity surges in 1995 and 2000, Germany's productivity declined dramatically during the same period. We examine the sources of Germany's productivity demise using the ifo industry growth accounting database that provides detailed industry-level investment information. While much attention has focused on the reduction in German labor hours, our data show that information and communication technology (ICT) investment in Germany was deeply lacking in the mid-1990s as compared with the United States. The transition to the new economy mitigated the German productivity slowdown, but did not reverse it. After 2000, we find that a recovery in Non-ICT investment was offset by a widespread collapse in German total factor productivity. Over half of the German industries (accounting for almost 50 per cent of German output) experienced negative total factor productivity growth. This second major difference between the United States and German industry performance explains Germany's secular departure from the technological frontier.     

Embodied Technological Change,Learning‐by‐doing and the Productivity Slowdown*

The productivity slowdown in the US economy since the first oil shock has recently been associated with a larger decline rate of the relative price of equipment investment and a smaller rate of disembodied technical change. We set up a growth model in which learning‐by‐doing is the engine of both embodied and disembodied technological progress. A shift in the relative efficiency of learning‐by‐doing from the consumption to the investment sector is shown to imply a technological reassignment consistent with the above‐mentioned evidence. This result derives from the interaction between the obsolescence costs inherent in embodiment and the learning‐by‐doing engine.     

Energy and capital inputs: cornerstones of productivity growth in Mexico: 1965–2004

Gross domestic product per remunerated labor (GDP/L), known as the Mexican average productivity, grew very rapidly from 1965 to 1979; it increased at an average annual rate of 3.7%. But from 1979 through 2004, productivity stagnated with an average annual growth rate of only 0.19%. The hypothesis is that from 1965 through 1979, productivity increased rapidly because of concomitant growth in the utilized capital and energy per worker and the improvements in technology. After 1979, the productivity growth came to a standstill because of a slowdown in investment and stagnation in the utilized capital and energy per worker due to the sharply rising energy prices. The tool chosen to test this hypothesis is an aggregate Cobb-Douglas production function characterized by technical change embodied in the gross investment in new machinery and equipment. The estimation of this model shows energy as a cornerstone of productivity growth independent of capital and new technology.     

Latin America after the global crisis: the role of export-led and tradable-led growth regimes

Is the ongoing economic slowdown in industrialized countries likely to impact Latin American growth negatively in the medium- to long-run? This paper considers various transmission channels that work through trade in goods and services, and finds econometric evidence suggesting that shrinking global imbalances may create problems for Latin America. Specifically, using panel data analysis, we find that the trade balance as a proportion of GDP is positively associated with Latin American economic growth over the period 1953–2009. We then develop a simple dynamic model to help explain our main finding through investment and saving behaviour.     

Multivariate filter estimation and ARDL model analysis of China’s potential output

In this article, we apply a new multivariate filter approach to estimate China’s potential output. Furthermore, we build an ARDL model to analyse the influence on potential growth caused by important factors that contribute to estimation and China’s development. Our results show that the current economic slowdown is not a cyclical phenomenon and China’s potential growth has declined since 2010. We also show that fixed asset investment and trade, which have a long-run relationship with potential output, exert negative long-run effect on potential growth justifying the implementation of China’s recent supply-side reforms.     

次贷危机背景下美国财政政策走势的预测——基于凯恩斯主义视角的一个分析

次贷危机爆发的根源一直是学术界争论的焦点.对战后六十多年来美国财政政策历史沿革的考察,美国每当遇到经济增长放缓、有步入衰退的危险时,政府都会遵循凯恩斯主义的赤字财政理论,利用财政工具扩大有效需求,同时还会在一定程度上对经济长期增长率的提高进行财政投入.次贷危机爆发是与美国政府多年来推行的赤字财政政策密不可分的.而在全球经济失调背景下,财政赤字的过度膨胀又为政府在应对危机、化解系统风险时设置了财政约束刚性的障碍.从中短期来看,为应对经济危机的威胁,防止产出出现大幅下滑.预计美国政府将采取以下财政措施:第一,冻结减税计划,防止赤字进一步扩大;第二,加大转移支付力度,帮助贫困家庭获得工作和生活必需品,防止出现大面积社会不满;第三,在国际资本市场上发行美国政府特别债券,筹集应对经济危机、扩大政府购买开支的资金;第四.加大政府购买支出力度,且这种购买主要体现在对经济结构改变有重要推动意义的项目上;最后,美国在实行以上积极财政政策的同时,还将辅以相应的汇率与货币政策.     

WHY DID JAPAN'S TFP GROWTH SLOW DOWN IN THE LOST DECADE? AN EMPIRICAL ANALYSIS BASED ON FIRM‐LEVEL DATA OF MANUFACTURING FIRMS*

This study analyses the cause of the slowdown in Japan's TFP growth during the 1990s. Many preceding studies, examining the issue at the macro‐ or industry‐level, have found that the slowdown was primarily due to the stagnation in TFP growth in the manufacturing sector. Using firm level panel data covering the entire sector, we investigate the causes of the TFP slowdown and find that the reallocation of resources from less efficient to more efficient firms was very slow and limited. This “low metabolism” seems to be an important cause for the slowdown in Japan's TFP growth.     

Technology Adoption Costs and Productivity Growth: The Transition to Information Technology

Using two panels of U.S. manufacturing industries, this paper estimates capital adjustment costs from 1961 to 1996. I find that from 1974–1983 adjustment costs rose sharply—they more than doubled from about 3% of output to around 7%. Moreover, this increase is specifically associated with a shift to investment in information technology. But such large adoption costs imply that the Solow residual mismeasures productivity growth: Adoption costs are resource costs representing an unmeasured investment. I find that when this investment is included, productivity grew about 0.4% per annum faster than official measures during the 1970's and early 1980's, reducing the size of the productivity “slowdown.” Indeed, estimated productivity growth rates were roughly the same from 1974–1988 as from 1949–1973. Thus technology transitions critically affect productivity growth measurement. Journal of Economic Literature Classification Numbers: O30, O47, E22.     

Creative Destruction, Investment Volatility, and the Average Age of Capital

In this article, a new numerical procedure is used to compute the equilibrium of a vintage capital growth model with nonlinear utility, where the scrapping time is nonconstant. We show that equilibrium investment and output converge nonmonotonically to the balanced growth path due to replacement echoes. We find that the average age of capital is inversely related to output, which is consistent with recent micro evidence reinforcing the importance of the embodied question. We also find that an unanticipated permanent increase in the rate of embodied technological progress causes labor productivity to slowdown in the short run.     

Japan's oligopolies: Potential economy wide gains from structural reforms

Japan's slowdown preceded those in the other advanced economies and is therefore of global significance. While its initial causes were financial, a resurgence will depend on productivity growth, key determinants of which are investment and industrial structure. This paper focuses on the costs of a structure dominated by oligopolies and the potential gains from combined competition and tax reform. We first identify industry concentration levels and economic rents using firm specific data and then incorporate these in a calibrated economy-wide model. Simulations suggest that competition policy and more openness to investment in services could deliver 5–17% of additional GDP. These stimulate investment via returning external wealth. Gains are spread most evenly if competition policy is combined with company tax reform. This retains fiscal balance and improves the domestic purchasing power of all Japanese incomes.     

Total factor productivity convergence in German states since reunification: Evidence and explanations

A quarter-century after reunification, labor productivity in the states of eastern Germany continues to lag systematically behind the West. Persistent gaps in total factor productivity (TFP) are the proximate cause; conventional and capital-free measurements confirm a sharp slowdown in TFP growth after 1995. Strikingly, eastern capital intensity, especially in industry, exceeds values in the West, casting doubt on the embodied technology hypothesis. TFP growth is negatively associated with rates of investment expenditures. The stubborn East-West TFP gap is best explained by low concentration of managers, low startup intensity and the distribution of firm size in the East rather than R&D activities.     

Veblen and Kropotkin on Human Evolution

This paper studies the spillover effects of economic fluctuations in the United States on economic activity in Latin America and the Caribbean. Fluctuations in U.S. GDP growth have spillover effects that stimulate real growth and accelerate price inflation across many countries. Underlying these spillover effects are significant movements in private consumption, and to a larger extent, private investment. Openness to the United States has significant effects that accelerate growth of exports and/or imports across many countries. The net effects on the trade and current account balances vary across countries. Overall, the evidence supports concerns about adverse spillover effects of a slowdown in the U.S. economy on neighboring countries, necessitating careful mobilization of countercyclical domestic tools to hedge against potential risk and mitigate the severity of economic downturns.