Abstract
AbstractThere is now a large volume of growth accounting estimates covering the long run experience of advanced countries. However, most of the studies in economic history are not based on state‐of‐the‐art methods. There is a trade‐off between maintaining international comparability and achieving the best results for individual countries. A one‐size‐fits‐all approach will not always do justice to the variety of historical experiences since the conventional assumptions may sometimes be inappropriate. Nevertheless, growth‐accounting studies have produced some eye‐catching results which provide food for thought both for economic historians and for growth economists. These include (1) the finding that TFP growth was comparatively slow during the First Industrial Revolution, (2) Solow's famous conclusion that TFP growth accounted for 7/8ths of American labour‐productivity growth was atypical, (3) the impact of new general‐purpose technologies on growth typically takes a long time to materialize, ICT being the notable exception and (4) that capital‐deepening was much more important relative to TFP growth in east Asian than in western European catch‐up growth. Growth accounting is undoubtedly a valuable item in the cliometrician's toolkit. Nonetheless, we anticipate the introduction of more sophisticated methods and look forward to progress in understanding what explains marked differences in TFP performance.
Highlights
Growth accounting came to prominence in the 1950s and early 1960s notably through the work of the National Bureau of Economic Research on long run trends in the American economy which was summarized in Abramovitz (1956) and culminated in the magisterial volume by Kendrick (1961).1 Solow (1957) put the growth economics into growth accounting, making clear its interpretation in terms of the distinction between shifts of and moves along the aggregate production function
Growth-accounting studies have produced some eye-catching results which provide food for thought both for economic historians and for growth economists. These include (1) the finding that Total Factor Productivity (TFP) growth was comparatively slow during the First Industrial Revolution, (2) Solow’s famous conclusion that TFP growth accounted for 7/8ths of American labour-productivity growth was atypical, (3) the impact of new general-purpose technologies on growth typically takes a long time to materialize, ICT being the notable exception and (4) that capital-deepening was much more important relative to TFP growth in east Asian than in western European catch-up growth
We review the state of play with regard to growth accounting in the economic history literature for now-advanced countries
Summary
Growth accounting came to prominence in the 1950s and early 1960s notably through the work of the National Bureau of Economic Research on long run trends in the American economy which was summarized in Abramovitz (1956) and culminated in the magisterial volume by Kendrick (1961).1 Solow (1957) put the growth economics into growth accounting, making clear its interpretation in terms of the distinction between shifts of and moves along the aggregate production function. Jorgenson et al (1987) developed a more general input-output framework, explicitly accounting for the use of intermediate inputs, and integrated growth accounting with index number theory and national accounts Aided by this solid foundation, growth accounting has become a staple of economic historians’ studies of long-run growth. The issue is interdependence: both between the opportunities presented by the nature of technological change for capital accumulation and between the trajectory of physical and human capital formation and technological change While the latter is stressed by some endogenous-growth models, it is the former which is highlighted by a comparison of the American growth process in the 19th and 20th centuries. We point to some opportunities to extend the scope of research in this area
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