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Why is TFP assumed exponential by default? What's the theory behind that? A time lag in the transfer between exponential input growth (e.g. population) and expo
by pishpash 5y ago
Why is TFP assumed exponential by default? What's the theory behind that? A time lag in the transfer between exponential input growth (e.g. population) and exponential output growth?
- jasoncrawford 5y agoIt's not always assumed to be exponential. It was assumed exponential by Paul Romer because long-term economic growth is pretty exponential. Much subsequent work has followed that model, but not all of it.
- marcosdumay 5y ago> long-term economic growth is pretty exponential Yeah, that graph with the largest time scale on the article strongly disagrees.
- pishpash 5y agoBut TFP is not output. Exponential output growth can come directly from exponential input growth, which would be a trivial obvervation.
- dash2 5y agoNo. The inputs are labour and capital, so that's already taken care of. One answer might be "TFP reflects technical knowledge; the more knowledge there is, the easier it is to generate new knowledge". But you'd have to get into growth macro for the details. Indeed, Romer is the person.