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February 14, 2008
Rodrik on growth accounting
What use is sources-of-growth accounting?
Aside from all kind of measurement problems, these accounting exercises say nothing about causality, and so are very hard to interpret. Say you found it's 50% efficiency and 50% factor endowments. What conclusion do you draw from it? You could imagine a story where the underlying cause of growth is factor accumulation, with technological upgrading or enhanced allocative efficiency as the by-product. Or you could imagine a story whereby technological change is the driver behind increased accumulation. Both are compatible with the result from accounting decomposition. Indeed, I have yet to see a sources-of-growth decomposition which answers a useful and relevant economic or policy question...So here is a contest for economist (or wannabe economist) readers of this blog: can you come up with an interesting question to which a sources-of-growth decomposition is the answer?
Posted by Dingel at February 14, 2008 11:14 AM