Is Growth Additive?
Growth theory is based on the assumption of exponential total factor productivity (TFP) growth, or that the conditional expectation of the next TFP increment is proportional to the current level of TFP. In the U.S., we find strong evidence that TFP growth is conditionally additive, not exponential. Even starting from low priors, Bayesian estimation selects the additive model over the exponential one. In addition, professional forecasts and international TFP series are consistent with the additive model but not with the exponential one.
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Copy CitationCallum J. Jones, David López-Salido, and Thomas Philippon, "Is Growth Additive?," NBER Working Paper 35415 (2026), https://doi.org/10.3386/w35415.Download Citation
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