Growth and TFP

Question 1

Problems with growth accounting methodology?

Answer 1

TIO

TFP: measures improvements in WAY factors used

• > Needs assumptions
• CRS, C-D
• Markets competitive, firms profit-maximising
• K and L homogeneous and tech progress in TDP not K

Inputs

• Need to know quality, intensity, hrs worked of L, NOT JUST QUANTITY
• Capital: adjustment for new tech vs new investment, gotta separate

Output

• Quality
• Weighting of changing sectors

Question 2

What’s Feinstein’s comparison of growth of GDP per man year growing faster in all six countries than in the UK?

Answer 2

Saying there’s RELATIVE but not ABSOLUTE decline
with a few exceptions, eg US overtook in 1880. There’s convergence between the countries analysed WITH EXCEPTION OF UK, which is diverging (underpins climacteric position, at least ito the growth rate of labour productivity)

Question 3

What does Broadberry have to say?

Answer 3

Finds differences in whole economy picture a combo of

• Labour productivity differences by sector
• Weighting of different sectors in whole economy

Question 4

What does Broadberry find in labour productivity in manufacturing?

Answer 4

US:UK
2 : 1
Always was the case, even in 1820-50, when during IR would expect to be better than Brit, accelerates after; at no stage was Brit the labour productivity leader in manufacturing

Germany:UK -> 1:1

Question 5

Why was labour productivity higher in US?

Answer 5

US HAD:
Better resources
Mass market

US DIDN’T HAVE:
Skilled labour

SO: had to adopt mechanised mass production techniques

Resources + demand -> technological choice

Question 6

What does Broadberry see for WHOLE economy labour productivity?

Answer 6

US and Germany catching up to UK, former even overtakes.

US lower 1870, overtakes 1890s, forges ahead
Comparative performance better at whole economy level (at least compared to lab prod in man) as
UK 😊 in agriculture and services and has more working in industry

Question 7

SO do factor inputs or lack of efficiency explain Brit’s slow growth?

Measuring factor inputs: Labour, Capital

Answer 7

L:

• Population rising
• No unemployment rend
• Hours of work generally declining but increasing at the end

SO for quantity: during boom no growth, during decline a bit of growth, population growth offset by declining hours of production

• Fewer kids, so more skilled peeps
• Reduction in hours increased intensity/efficiency
• Changes in compulsory education, didn’t have it until 1870

K:
- fixed capital, domestic reproducible capital at constant prices, averages 1.9% in both periods 1850-70 1870-1913

Question 8

What do Matthews, Feinstein and Odling Smee find?

Answer 8

That Total Factor Productivity (GDP growth minus factor input growth) actually DROPS from
1.4% -> 0.5%
NOT getting efficiency improvements from factor input growth!
BUT this is not taking into account quality, is we take into account labour quality find NO growth in TFP
Whatever improvements we DO see are not from better tech

TFP: 0% p.a. 1873-1913