Is growth additive?

Series: Working Papers. 2630.

Author: Callum Jones, David López-Salido and Thomas Philippon

Economic growth and convergence

• Productivity
• Quantitative methods
• Estados Unidos

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Is growth additive? (1 MB)

Abstract

Growth theory is based on the assumption of exponential total factor productivity (TFP) growth, in other words, that the conditional expectation of the next TFP increment is proportional to the current level of TFP. In the United States, we find strong evidence that TFP growth is conditionally additive, not exponential. Even starting from low priors, Bayesian estimation selects the additive model over the exponential one. In addition, professional forecasts and international TFP series are consistent with the additive model but not with the exponential one.