Premium
LONG‐RUN GROWTH PROJECTIONS AND THE AGGREGATE PRODUCTION FUNCTION: A SURVEY OF MODELS USED BY THE U.S. GOVERNMENT
Author(s) -
STIROH KEVIN J.
Publication year - 1998
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.1998.tb00534.x
Subject(s) - economics , production function , productivity , endogenous growth theory , growth theory , production (economics) , government (linguistics) , function (biology) , capital (architecture) , macroeconomics , growth accounting , potential output , total factor productivity , aggregate (composite) , public economics , econometrics , microeconomics , human capital , neoclassical economics , economic growth , monetary policy , materials science , composite material , history , linguistics , philosophy , archaeology , evolutionary biology , biology
This paper examines the theory and method behind the long‐run growth projections of four prominent models used within the U.S. government. The growth models of the Congressional Budget Ofice, the Social Security Administration, the Office of Management and Budget, and the General Accounting Office are all firmly based on the neoclassical framework of an aggregate production function, but several practical dfferences exist. Most notably, the CBO and GAO models endogenize capital accumulation, while the SSA and OMB simply assume that labor productivity growth will continue at historical rates. Although recent endogenous growth theory and the expanding empirical literature on cross‐sectional variation emphasize alternative factors, the US. government agencies remain appropriately committed to the traditional, neoclassical framework as a tool for projecting long‐run growth.