Working Paper: NBER ID: w13532
Authors: Peter N. Ireland; Scott Schuh
Abstract: A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods-producing technologies. This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent. Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as a catch-up in levels that is unlikely to persist or be repeated anytime soon.
Keywords: productivity; macroeconomic performance; real business cycle model
JEL Codes: E32; O41; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| consumption-specific technology shocks (O49) | productivity growth (O49) |
| productivity slowdown of the 1970s (O49) | consumption goods sector (E20) |
| investment-specific shocks (E22) | productivity growth (O49) |
| past shocks (E32) | current and future productivity trends (O49) |