Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153349
Authors: 
McAdam, Peter
Willman, Alpo
Year of Publication: 
2008
Series/Report no.: 
ECB Working Paper 915
Abstract: 
We develop a framework for analyzing “medium-run” departures from balanced growth, and apply it to the economies of continental Europe. A time-varying factor-augmenting production function (mimicking “directed” technical change) with a below-unitary substitution elasticity coupled with supporting short-run factor demands (and price setting) is shown to account for the observed dynamics of factor incomes shares, capital deepening and the capital-output ratio. Based on careful data accounting, we also identify a rising mark-up, which we ascribe to the rise of Services. The balanced growth path emerges as a special (and testable) case of our framework, as do existing strands of medium-run debates.
Subjects: 
adjustment costs
Effective Labor Hours
Elasticity of Substitution
euro area
Factor-Augmenting Technical Progress
Income Distribution
Medium Run
productivity
JEL: 
C22
E23
E25
O30
O51
Document Type: 
Working Paper

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