Growth in Developed Nations
T HE use of aggregate production functions of the Cobb-Douglas type to explain the sources of growth, and of differences in growth rates, in recent years among eight European countries and the United States is discussed in this paper. Output is related to inputs of labor and capital, together with a residual not accounted for by these factor inputs, whether measured conventionally or in efficiency units. Until recently such procedures, when applied to European countries, required the use of balance-sheet data to measure capital, but our ignorance of prices and valuation methods implicit in such data has been a serious weakness. Thanks mainly to the enterprise of Simon Kuznets, Moses Abramovitz and their co-workers, supported by the Social Science Research Council, historical series on gross investment have recently become available for some European countries. For such countries the capital stock can now be estimated by cumulating investment expenditures in constant prices, along lines pioneered by Raymond Goldsmith for the United States. Despite uncertainties surrounding deflation procedures and the paucity of data for estimating useful lives, such capital estimates are, I believe, greatly to be preferred to figures resting on balance-sheet valuations. The availability of these new data prompted the present study, preliminary results of which are given in this paper.
- DOI
- 10.2307/1926723
- Volume
- 51 (2)
- Pages
- 143
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