A New Method of Long-Run Growth Accounting with Applications to the Soviet Economy 1928-87 and the US Economy 1949-78
Paper No' CEPDP0014:
In this paper we develop a new model of growth accounting and use it to analyse the long-term growth of the US and the USSR. The technique is designed to capture the indirect or "feedback" contributions of technological change and labour input growth. These indirect contributions arise from the fact that in the medium- and long-term, technological progress and labour input growth raise the level of current output and thus, given the investment/output ratio, the growth rate of capital. The technique also avoids the problem of identifying the bias of technological progress faced by the standard shore-run method of growth accounting. In our application to the Jorgenson-Gollop-Fraumeni data for the US economy 1949-1978, the technique shows that over the entire period, technological progress and labour input growth were the two main source of growth, with capital accumulation in third place. The results of our analysis of Soviet economic growth over this period are less clear-cut but still strongly suggestive. In particular, our estimates of the contribution of technological progress to Soviet economic growth typically show it to be considerable, and indeed sometimes overwhelming. These results stand in sharp contrast to the standard view that Soviet economic growth since 1928 has relied primarily on increased amounts of inputs rather than on technological progress.