New results on total factor productivity and the import of creative destruction

October 13, 2017
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I am not sure I trust any TFP measures (what if innovation is simply embodied in investment?), but this paper by Gerben Bakker, Nicholas Crafts, and Pieter Woltjer is worth a ponder:

We develop new aggregate and sectoral Total Factor Productivity (TFP) estimates for the United States between 1899 and 1941 through better coverage of sectors and better-measured labor quality, and find TFP-growth was lower than previously thought, broadly based across sectors, and strongly variant intertemporally. We then test and reject three prominent claims. First, the 1930s did not have the highest TFP-growth of the twentieth century. Second, TFP-growth was not predominantly caused by four ‘great inventions’. Third, TFP-growth was not driven indirectly by spillovers from great inventions such as electricity. Instead, the creative-destruction -friendly American innovation system was the main productivity driver.

For the pointer I thank David Levey.

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