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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page Transition Dynamics in Vintage Capital Models: Explaining the Postwar Catch-Up of Germany and Japan
John C. Williams and Simon Gilchrist

Abstract: We consider a neoclassical interpretation of Germany and Japan's rapid postwar growth that relies on a catch-up mechanism through capital accumulation where technology is embodied in new capital goods. Using a putty-clay model of production and investment, we are able to capture many of the key empirical properties of Germany and Japan's postwar transitions, including persistently high but declining rates of labor and total-factor productivity growth, a U-shaped response of the capital-output ratio, rising rates of investment and employment, and moderate rates of return to capital.

Keywords: Putty-clay, embodied technology, productivity growth, convergence

Full paper (302 KB PDF)

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Last update: February 13, 2001