Hostname: page-component-cd9895bd7-mkpzs Total loading time: 0 Render date: 2024-12-22T17:12:28.660Z Has data issue: false hasContentIssue false
  • English
  • Français

Technical Progress and the Natural Rate in Models of the UK Economy

Published online by Cambridge University Press:  26 March 2020

Keith B. Church ,
Peter R. Mitchell ,
Joanne E. Sault  and
Kenneth F. Wallis
Get access Rights & Permissions [Opens in a new window]

Abstract

This article analyses the role of technical progress in three models of the UK economy. In the standard neoclassical growth model, the growth of the economy is dictated by the growth rate of technical progress plus that of the population. Our two simulation experiments, increasing the level of technical progress by 1 per cent and the growth rate by 0.1 percentage points, suggest that technological progress plays the same role in these large macroeconometric models. In both cases the result is higher output and real wages. However adjustment following the shocks is protracted, giving substantial technological unemployment which in several instances is permanent.

Type
Articles
Information
National Institute Economic Review , Volume 164 , April 1998 , pp. 80 - 89
Copyright
Copyright © 1998 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

∗

A previous version of this paper was presented at an ESRC conference on Macroeconomic Modelling and Economic Policy, London, 8-9 January 1998. This research is supported by a grant from the Economic and Social Research Council.

References

Chan, A., Savage, D. and Whittaker, R. (1995), The new Treasury model. Government Economic Service Working Paper no.128 (Treasury Working Paper no. 70), London: HM Treasury.Google Scholar
Church, K.B., Mitchell, P.R., Sault, J.E. and Wallis, K.F. (1997), ‘Comparative properties of models of the UK economy’, National Institute Economic Review, no.161, 91–100.CrossRefGoogle Scholar
Church, K.B., Mitchell, P.R. and Wallis, K.F. (1998), ‘Short-run rigidities and long-run equilibrium in large-scale macroeconometric models’, in Market Behaviour and Macroeconomic Modelling (Brakman, S., Ees, H. van and Kuipers, S.K., eds), Macmillan, forthcoming.CrossRefGoogle Scholar
Englander, A.S. and Mittelstädt, A. (1988), ‘Total factor productivity: macroeconomic and structural aspects of the slowdown’, OECD Economic Studies, no.10, 7–56.Google Scholar
Giorno, C., Richardson, P. and Suyker, W. (1995), ‘Technical progress, factor productivity and macroeconomic performance in the medium term’, OECD Economic Studies, no.25, 153–177.Google Scholar
Hargreaves, C.P. (ed.) (1994), A Comparison of Economy-Wide Models of Australia: Responses to a Rise in Labour Productivity, Commission Paper no.2, Economic Planning Advisory Commission, Commonwealth of Australia.Google Scholar
Joyce, M. and Wren-Lewis, S. (1991), ‘The role of the real exchange rate and capacity utilisation in convergence to the NAIRU’, Economic Journal, 101, 497–507.CrossRefGoogle Scholar
Layard, P.R.G. and Nickell, S.J. (1985), ‘The causes of British unemployment’, National Institute Economic Review, no.111, 62–85.CrossRefGoogle Scholar
Manning, A. (1992), ‘Productivity growth, wage setting and the equilibrium rate of unemployment’, Centre for Economic Performance Discussion Paper no.63, London School of Economics.Google Scholar
Owen, C. and Wren-Lewis, S. (1993), ‘Variety, quality and U.K. manufacturing exports’, Discussion Paper no.14, International Centre for Macroeconomic Modelling, University of Strathclyde.Google Scholar
Torres, R. and Martin, J.P. (1990), ‘Measuring potential output in the seven major OECDeconomies’, OECD Economic Studies, no.14, 127–149.Google Scholar
Turner, D.S. (1991), ‘The determinants of the NAIRU response in simulations on the Treasury model’, Oxford Bulletin of Economics and Statistics, 53, 225–242.CrossRefGoogle Scholar
Turner, D.S., Richardson, P. and Rauffet, S. (1993), ‘The role of real and nominal rigidities in macroeconomic adjustment: a comparative study of the G3 economies’, OECD Economic Studies, no. 21, 90–137.Google Scholar