Accounting for Growth
A satisfactory account of the postwar growth experience of the United States should be able to come to terms with the following three facts: 1. Since the early 1970's there has been a slump in the advance of productivity. 2. The price of new equipment has fallen steadily over the postwar period. 3. Since the mid-1970's the skill premium has risen. Variants of Solow's (1960) vintage-capital model can go a long way toward explaining these facts, as this paper shows. In brief, the explanations are: 1. Productivity slowed down because the implementation of information technologies was both costly and slow. 2. Technological advance in the capital goods sector has lead to a decline in equipment prices. 3. The skill premium rose because the new, more efficient capital is complementary with skilled labor and/or because the use of skilled labor facilitates the adoption of new technologies.