Proposal preview

Accounting for growth in global economic history

Growth accounting is as old as modern growth theory. Building on the seminal work of Copeland (1937), Tinbergen (1942) was the first to use the aggregate production function to decompose output growth into input contributions. Solow (1957) adapted the concept of Total Factor Productivity (TFP) from Stigler (1947) and used it as a parameter of Hicks-neutral neoclassical production function. Solow offered an attractive approach to measuring the dynamics of growth that has remained the template for growth accounting until today. The past half a century of growth accounting demonstrates the enormous legacy of Solow’s pioneering work (Hulten 2001). Different approaches have been proposed since, presenting economists and historians with both challenges and opportunities. Historical growth accounting has made one of the greatest contributions to comparative and global economic history (Crafts 2004; van Ark and Crafts 2007; Crafts 2010). Dual TFP accounting developed by Jorgenson and Griliches (1967) helped historians to extend the analysis of growth dynamics to periods preceding the establishments of national accounts using data on factor prices rather than quantities (Antràs and Voth 2003; Broadberry and Gupta 2009).

The following generation of growth accounting (Jorgenson, Gollop, and Fraumeni 1987; Jorgenson, Ho, and Stiroh 2005) improved the measurement of labour and capital inputs, incorporated labour and capital services, inputs, as well as labour composition. Disaggregated growth accounts suggested by Jorgenson, Gollop and Fraumeni (1987) have allowed researchers to measure returns to scale and the structural components of growth, rendering TFP a measure of efficiency and moving beyond a simple ‘measure of our ignorance’, as Abramovitz famously labelled it. The KLEMS methodology was introduced (Jorgenson, Ho, and Stiroh 2005; Timmer et al. 2010; Jorgenson, Fukao, and Timmer 2016) to exploit the richness of disaggregated statistics on output and inputs, including ICT capital, intangible assets and natural resources, available for more recent times, in order to better understand the aggregate growth process.

Economists have debated which approach is superior for measuring output, capital input and labour composition, which is the appropriate level of analysis, or how to best account for the effects of structural shifts in employment and output (Oulton 2016). Another issue is to what extent the neoclassical framework is applicable to economies, where free markets are absent or limited (Weitzman 1970; Easterly and Fischer 1995). Recent innovations in growth theory also question to what extent factor accumulation can be isolated from productivity growth (see models of endogenous and biased technical change) and whether the same production functions can be applied to different sectors of the economy (new structural economics). These insights have important implications for economic historians on how to measure the sources of growth and how to interpret the findings of historical growth accounts.

This session proposes three objectives. Firstly, we wish to provide an overview of current and recent contributions to historical growth accounting around the globe, where the literature stands, how far we have progressed, and what challenges we face. Secondly, we seek to build bridges to recently developed cross-country databases on comparative growth accounts, in particular EU KLEMS and the Penn World Tables, which provide the standard sources for economists and represent the methodological state of the art. This agenda calls for a second generation of historical national accounts and growth accounts for core western economies, too, since the seminal contributions from the 1950s and 1960s have become, in many aspects, out of date. In this context, we must investigate to what extent historical statistics allows us to analyse the role of intangibles (inventions), communication technologies (e.g. telegraph) or intermediate inputs (coal-steam-electricity energy transformations), using recent advances of the growth accounting framework. Finally, we wish to discuss how the most recent insights from growth theory can be integrated into growth accounting, which is vital for our work to continue to make an impact similar to what it has done over the last six decades. To blend these three perspectives, our session will include introductory and discussion notes from some of the internationally most prominent names on the topic.

References

Antràs, Pol, and Hans-Joachim Voth. 2003. “Factor Prices and Productivity Growth during the British Industrial Revolution.” Explorations in Economic History 40 (1): 52–77.

Ark, Bart van, and Nicholas Crafts. 2007. Quantitative Aspects of Post-War European Economic Growth. Cambridge: Cambridge University Press.

Broadberry, Stephen N., and Bishnupriya Gupta. 2009. “Lancashire, India, and shifting competitive advantage in cotton textiles, 1700–1850: the neglected role of factor prices.” Economic History Review 62 (2): 279-305.

Copeland, Morris A. 1937. “Concepts of National Income.” In The Conference on Research in Income and Wealth, 1:2–63. NBER Book Series Studies in Income and Wealth. New York: National Bureau of Economic Research. http://papers.nber.org/books/unkn37-1.

Crafts, Nicholas. 2004. “Productivity Growth in the Industrial Revolution: A New Growth Accounting Perspective.” Journal of Economic History 64 (2): 521–35.

———. 2010. “The Contribution of New Technology to Economic Growth: Lessons from Economic History.” Revista de Historia Economica/Journal of Iberian and Latin American Economic History 28 (3): 409–40.

Easterly, William, and Stanley Fischer. 1995. “The Soviet Economic Decline.” The World Bank Economic Review 9 (3): 341–71.

Hulten, Charles R. 2001. “Total Factor Productivity: A Short Bibliography.” In , edited by Charles R. Hulten, Edwin R. Dean, and Michael J. Harper, 1–53. New Developments in Productivity Analysis. Chicago; London: The University of Chicago Press.

Jorgenson, Dale W., Kyoji Fukao, and Marcel P. Timmer, eds. 2016. Growth and Stagnation in the World Economy. Cambridge University Press.

Jorgenson, Dale W., Frank M. Gollop, and Barbara Fraumeni. 1987. Productivity and U.S. Economic Growth. Amsterdam: North-Holland.

Jorgenson, Dale W., and Zvi Griliches. 1967. “The Explanation of Productivity Change.” Review of Economic Studies 34 (3): 249–83.

Jorgenson, Dale W., Mun S. Ho, and Kevin J. Stiroh. 2005. Information Technology and the American Growth Resurgence. Vol. 3. Cambridge, MA: The MIT Press.

Oulton, Nicholas. 2016. “The Mystery of TFP.” International Productivity Monitor 31: 68–87.

Solow, Robert M. 1957. “Technical Change and the Aggregate Production Function.” Review of Economics and Statistics 39 (3): 312–20.

Stigler, George J. 1947. Trends in Output and Employment. National Bureau of Economic Research.

Timmer, Marcel P., Robert Inklaar, Mary O’Mahony, and Bart van Ark. 2010. Economic Growth in Europe. Cambridge: Cambridge University Press.

Tinbergen, Jan. 1942. “Zur Theorie der Langfristigen Wirtschaftsentwicklung.” Weltwirtschaftliches Archiv 55 (1): 511–49.

Weitzman, Martin L. 1970. “Soviet Postwar Economic Growth and Capital-Labor Substitution.” American Economic Review 60 (4): 676–92.

Organizer(s)

  • Leandro Prados de la Escosura, Charles III University of Madrid, leandro.prados.delaescosura@uc3m.es, Spain
  • Tamás Vonyó, Bocconi University, tamas.vonyo@unibocconi.it, Italy
  • Ilya B. Voskoboynikov, National Research University Higher School of Economics, ivoskoboynikov@hse.ru, Russia

Session members

  • Dale W. Jorgenson, Harvard University, djorgenson@harvard.edu
  • Deb K. Das, University of Delhi, dkdas@icrier.res.in
  • José Díaz, Pontifica Universidad Católica de Chile, jdiazb@uc.cl
  • Kyoji Fukao, Hitotsubashi University, k.fukao@r.hit-u.ac.jp
  • Clarie Giordano, Banca d'Italia, claire.giordano@bancaditalia.it
  • Hak K. Pyo, Seul National University, hakkpyo@gmail.com
  • Gert Wagner, Pontifica Universidad Católica de Chile, gwagner@uc.cl
  • André Hofman, CEPAL/ECLAC , andre.hofman@gmail.com
  • Jop Woltjer, University of Groningen, p.j.woltjer@gmail.com

Proposed discussant(s)

  • Nicholas Crafts, Warwick University, N.Crafts@warwick.ac.uk
  • Bart van Ark, the Conference Board, Bart.VanArk@conference-board.org