ACCOUNTING FOR CANADA¡¯S ECONOMIC GROWTH

A dynamic stochastic general equilibrium model is constructed and calibrated to the Canadian economy. Technology disturbances from the Canadian economy are filtered through the model and used to generate artificial time series. Output growth in the model is then decomposed into the share weighted growth rates of the factor inputs and productivity. The model is then used to identify the endogenous responses of the factor inputs to the technology disturbances. The results suggest that much of the slowdown observed in Canadian output growth since 1974 can be explained by fluctuations in the rates of investment-specific and residual-neutral technological change.Investment-Specific Technological Change, Total Factor Productivity, Economic Growth

ICT Diffusion and Economic Growth in New Zealand

Two different theoretical treatments of technology diffusion in an economy are examined. The traditional model based on the aggregate production function approach first introduced by Solow (1957) assumes technology is unstructured and arrives as a continuous exogenous flow. This model predicts that the diffusion of new technologies will be contemporaneously correlated with growth in economic performance indicators. An alternative view explicitly models technological structure in the form of complementarities. It also incorporates the observation that new general purpose technologies (GPTs) invariably emerge in a crude form lacking many of the complementarities that enable them to become productive. This view predicts that when new technologies emerge costly investment in developing complementary technologies must take place and thus there will be a lag between the new technology’s introduction and observed growth in economic performance indicators. These two views articulate two general empirically testable hypotheses that are captured in a number of specific tests. One such test measures diffusion of information and communication technologies (ICT) as an independent phenomenon and compares its times series pattern to that of the growth of total factor productivity (TFP) in New Zealand. New Zealand’s experience in consistent with other OECD economies where the diffusion of ICT has occurred at the same time as a TFP slowdown. Another test measures relative ICT-skilled labour demand. Findings support the non-traditional view’s prediction that ICT-skilled labour will increase with the diffusion of ICT technology in New Zealand.ICT, Productivity, Diffusion Technology

Productivity Measurement: Alternative Approaches and Estimates

This paper provides a review of conceptual and methodological issues in measuring productivity. Attention is given to the concept of productivity and the relationship between productivity and technological change. Different approaches to measuring productivity are surveyed and the results from a number of NZ productivity studies are summarised. The availability of appropriate input and output data is essential for the accurate measurement of productivity and therefore this paper also discusses some important data issues that influence productivity measurement.Productivity; Measurement Issues; New Zealand; Technological Change

General Purpose Technologies in Theory, Applications and Controversy: A Review

Distinguishing characteristics of General Purpose Technologies (GPTs) are identified and definitions discussed. Our definition includes multipurpose and single-purpose technologies, defining them according to their micro-technological characteristics, not their macro-economic effects. Identifying technologies as GPTs requires recognizing their evolutionary nature, and accepting possible uncertainties concerning marginal cases. Many of the existing ‘tests’ of whether particular technologies are GPTs are based on misunderstandings either of what GPT theory predicts or what such tests can establish. The development of formal GPT theories is outlined, showing that only the early theories predicted the inevitability of GPT-induced showdown and surges. More recent GPT theories, designed to model the characteristics of GPTs, do not imply the necessity of specific macro effects. We show that GPTs can rejuvenate the growth process without causing slowdowns or surges. We conclude that existing criticisms of GPT theory can be resolved and that the concept remains useful for economic theory

Action economics? working with citizen groups in Revelstoke, BC to evaluate the impact of a living wage

Participatory action research has enabled communities to develop knowledge informed solutions to local challenges, challenges often involving difficult trade offs in the face of resource constraints. The challenges are typically defined by the local context, limiting both availability of data and generalizability of insights. We undertook an action economics approach with a group of Revelstoke community members deepen the collective understanding of the business impacts that may result from adoption of a living wage policy. An EXCEL™ workbook with macros enabled community members to explore possible costs and benefits. This tool clearly demonstrated the heterogeneity of business impacts and the form and scale of living wage employer benefits necessary for businesses to be no worse off. There are many context sensitive policy challenges that can benefit from an economic perspective, and therefore significant scope to share effective approaches for doing so

Economic Analysis of Knowledge: The History of Thought and the Central Themes

Following the development of knowledge economies, there has been a rapid expansion of economic analysis of knowledge, both in the context of technological knowledge in particular and the decision theory in general. This paper surveys this literature by identifying the main themes and contributions and outlines the future prospects of the discipline. The wide scope of knowledge related questions in terms of applicability and alternative approaches has led to the fragmentation of research. Nevertheless, one can identify a continuing tradition which analyses various aspects of the generation, dissemination and use of knowledge in the economy

The sources of total factor productivity growth: Evidence from Canadian data

A dynamic general equilibrium model is constructed and used to identify sources of total factor productivity growth in Canada and to quantify their importance. The model also provides procedures for constructing measures of technological progress. We find that periods of low productivity growth correspond to periods of high growth in investment-specific technology (IST) or high rates of technology embodiment. For example, the growth rate of IST was relatively high between 1974 and 1996. The higher growth rate of IST during this period should have increased the rate of productivity growth by an estimated 0.29 percentage points, ceteris paribus. Yet, productivity growth slowed. Why?Investment-specific technological change, Total factor productivity, Economic growth,

Total factor productivity and the measurement of technological change

TFP is interpreted in the literature in different, mutually contradictory ways. Changes in TFP are shown to measure not technological change, only the super-normal returns to investing in such change - returns that exceed the full opportunity cost of the activity. Thus, in the limit, technological change can proceed with unchanged TFP. Measuring the effects of technological change instead requires counterfactual estimates. Reasons why changes in TFP are imperfect measures of super normal returns are also studied - reasons connected with the timing of output responses, the treatment of R&D in the national accounts, the omission of resource inputs, and two types of aggregation.

DARWINIAN VERSUS NEWTONIAN VIEWS OF THE ECONOMY: Empirical tests of Schumpeterian and New Classical Theories

The modern Schumpeterian vision in which history matters is of a non-stationary, evolving economy driven by bursts of technological change initiated by agents facing uncertainty and producing long term, path dependent growth and shorter term non-random investment cycles. The New Classical vision in which history does not matter is of a stationary, ergodic process driven by rational agents facing risk and producing stable trend growth and shorter term cycles caused by random disturbances. We use Carlaw and Lipsey’s forthcoming simulation model of non-stationary, sustained growth driven by endogenous path dependent technological change under uncertainty, to generate artificial national accounts data. We first use an HP-filter to match these data to the RBC stylized growth facts. We then show that the raw simulation data pass standard tests for trend and difference stationarity, appearing to exhibit unit roots and cointegrating processes of order one. Thus, contrary to current belief, these tests do not establish that the real data are generated by a stationary process. Real data from six OECD countries are then used first to show that the hypothesis of a non-varying NAIRU is rejected for all six countries and then to estimate time varying NAIRU’s for each. The estimates are highly sensitive to the time period over which they are made. They also fail to show any relation between the difference between actual unemployment and the estimated NAIRU for each year and the acceleration in the inflation rate. Thus there is no tendency for the inflation rate to behave as required by the New Classical theory.non-ergodic equilibria, stionarity, real business cycles, growth theory, NAIRU, general equilibrium macroeconomics