The Anatomy of Growth in the OECD since 1870: the Transformation from the Post-Malthusian Growth Regime to the Modern Growth Epoch

This paper extends conventional growth accounting exercises to allow for endogeneity of capital, the demographic transition, age dependency, and employment rates among other factors. Using data for the OECD countries in the period 1870-2006 it is shown that growth has been predominantly driven by demographics and TFP growth. TFP has in turn been driven by R&D, knowledge spillovers through the channel of imports, educational attainment, and the interaction between educational attainment and the distance to the frontier. The estimates suggest permanent growth effects of R&D and human capital and, therefore, that growth can be expected to be positive for the rest of this century.human capital, demographic transition, endogenous growth models

ECONOMIC GROWTH, TFP CONVERGENCE AND WORLD EXPORTS OF IDEAS: A CENTURY OF EVIDENCE

This paper examines the effect of international patent stock on total factor productivity for 16 OECD countries over the past 120 years. The results show that the international patent stock is highly influential for economic growth and, together with knowledge spillovers through the channel of imports, has contributed significantly to TFP growth and σ-convergence among the OECD countries over the past 120 years.TFP growth, international diffusion of ideas, international patents, convergence.

A q Model of House Prices

This paper develops a Tobin’s q model of house prices which shows that changes in interest rates, demography, and income are likely to have only temporary effects on house prices while house prices in the long run are determined by prices of developed land, value added taxes, stamp duties, and construction costs. Empirical estimates show that agricultural land prices are a proxy for urban land prices, which, together with construction costs are the key determinants of house prices in the long run.housing market, Tobin’s q, construction costs, land prices

The Dynamic Interaction between Equity Prices and Supply Shocks.

This paper develops a theory of medium term share price movements under slow adjustment in the labour market relative to the share market and perfect foresight in the share market. The model seeks to explain the slow movements in real share prices that have been observed in the OECD countries over the past 130 years. Using 130 years of data for the OECD countries, the empirical evidence indicates that movements in factor shares are crucial determinants of medium-term movements in share prices.share prices; supply shocks; rational expectations

Technology Spillover through Trade and TFP Convergence: 120 Years of Evidence for the OECD Countries

Using a new dataset on imports of technology and total factor productivity (TFP) over more than a century for the OECD countries, this paper tests for international technological transmission through trade. The empirical estimates suggest that imports of knowledge have been responsible for an almost 200% increase in TFP over the past century, but that the spillover effect has been highly unevenly distributed across countries, but has contributed to TFP convergence among the OECD countries.technology spillovers; imports; TFP convergence

Are there Diminishing Returns to R&D?

Semi-endogenous models and, to some extent, also Schumpeterian models are based on the assumption of diminishing returns to R&D. This paper shows that the null hypothesis of constant returns to R&D cannot be rejected for the OECD countries.returns to R&D; endogenous growth theory

GROWTH AND CAPITAL DEEPENING SINCE 1870: IS IT ALL TECHNOLOGICAL PROGRESS?*

Based on an asset pricing model this paper shows that traditional growth accounting exercises attribute too much weight to capital deepening and suggests a method to filter out TFP-induced capital-deepening from the estimates. Using data for 16 industrialised countries, it is shown that labour productivity and capital deepening have been driven by total factor productivity and reductions in the required stock returns over the past 137 years. Furthermore, it is shown that TFP precedes the K-L ratio and not the other way around.Growth accounting, TFP growth, required stock returns, endogeneity

The Macroeconomics of Share Prices in the Medium Term and in the Long Run.

This paper develops a macro-model of share prices that predicts that the growth rates in real share prices and real dividends gravitate toward predictable constants in the long run, but fluctuate on approximately decennial frequencies due to movements in capital’s share in total income and the output-capital ratio. The model has important implications for medium-term and long-run movements in real share prices and dividends, required share returns, the effects of new technologies on share returns, share price valuation, and whether shares are less risky in the long run than in the short run. Using macroeconomic data over 130 years for 22 OECD countries, the data give support for the model.share prices and dividends in the long run; share valuation; required share returns; macroeconomic factors

The Equity Risk Premium and the Required Share Returns in a Tobin’s q Model.

Based on the Tobin’s q principle this paper shows that earnings per unit of capital and the output capital ratio are excellent measures of the required share returns because they are only temporarily affected by earnings shocks but are driven permanently by changes in required share returns. Evidence for the US over the period from 1889 to 2002 suggests that real required share returns and the equity risk premium climbed to extraordinarily high levels from the late 1930, to the end of the 1940s, and have since declined. The risk premium is currently somewhere between 4 and 6%.expected share returns; equity risk premium; Tobin’s q; share valuation; macroeconomic factors

Can Second-Generation Endogenous Growth Models Explain The Productivity Trends and Knowledge Production In the Asian Miracle Economies?

Using data for six Asian miracle economies over the period from 1953 to 2006, this paper examines the extent to which growth has been driven by R&D and tests which second-generation endogenous growth model is most consistent with the data. The results give strong support to Schumpeterian growth theory but only limited support to semi-endogenous growth theory. Furthermore, it is shown that R&D has played a key role for growth in the Asian miracle economies.Schumpeterian growth; semi-endogenous growth; Asian growth miracle