unbalanced industry demand and supply shifts: implications for economic growth
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Unbalanced Industry Demand and Supply Shifts: Implications for Economic Growth in Canada and the United States. Anik Dufour, Jianmin Tang, and Weimin Wang. Presentation to The 2008 World Congress on National Accounts and Economic Performance Measures for Nations May 12–17, 2008. MEPA/APME. - PowerPoint PPT PresentationTRANSCRIPT
Unbalanced Industry Demand and Supply Shifts:Implications for Economic Growth
in Canada and the United States
MEPA/APME
Presentation to The 2008 World Congress on National Accounts and Economic
Performance Measures for NationsMay 12–17, 2008
MEPA/APME
Anik Dufour, Jianmin Tang, and Weimin Wang
MEPA/APME 2
Introduction: motivation
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ri
r yY
Real GDP is non-additive
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y
H
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H
Yor
A proxy
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r yY~
ii
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h
H
Y~
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Introduction: how does an industry influence real aggregate GDP in the chained-Fisher index?
– Real industry output
– Industry output prices
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Introduction: what drive a change in industry output and price?
– Supply shift, and
– Demand shift
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Introduction: supply shifts and demand shifts are often unbalanced across industries.
– Positive supply shifts: • more for the manufacturing• less for some services industries
– Positive demand shifts:• More for services • Less for goods
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Introduction: production resources will be reallocated under unbalanced industry demand and supply shifts
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Objective
• What are the industry contributions to
– aggregate GDP growth, or
– aggregate labour productivity growth?
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Real GDP
V , vPV and r as nominal GDP, real GDP and GDP deflator.
iv be industry nominal value added. yii py and y , r
i are industry nominal gross output, the real gross output, and the
gross output deflator mii pmm and , r
i are industry nominal intermediate inputs, the real intermediate
inputs, and the intermediate input deflator mi
yi pp ~ and ~ are the industry real prices of gross output and the intermediate inputs,
defined as vmi
mi
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Real GDP growth from year z to year t
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tzx is the growth rate of variable x over the period from z to t
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Industry contributions to real GDP growth
.~~
~~
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yCPC
1st term: pure quantity effect2nd term: pure price effect3rd term: the interaction of the first two effects.
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Major desirable properties
Consistent with real GDP in the chained-Fisher index
Additive for any long period
Invariant to base-year
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Canada: industry contribution to aggregate GDP growth1981-2000
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US: industry contribution to aggregate GDP growth1981-2000
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Aggregate labour productivity
,~~
~~~~
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H is total hours worked; rX is labour productivity
ih is industry hours worked yix and m
ix are industry real gross output per hour worked and real intermediate
input per hour worked
iyi
yi lps ~~ is industry gross output relative size ( Hhl ii and y
ip~ being real
gross output price)
imi
mi lps ~~ is industry intermediate input relative size ( Hhl ii and m
ip~ being
real intermediate input price).
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Aggregate labour productivity growth from year z to year t
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Industry contributions to aggregate labour productivity growth
1st term: the pure productivity effect 2nd term: the relative size effect 3rd term: the interaction of the first two effects.
.~~
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Major desirable properties
Consistent with real GDP in the chained-Fisher index
Additive for any long period
Invariant to base-year
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Relative size by industry in Canada and the U.S.
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Canada: industry contribution to aggregate labour productivity growth, 1981-2000
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U.S.: industry contribution to aggregate labour productivity growth, 1981-2000
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Conclusions
1. This paper provides a decomposition technique to study industry contribution to aggregate output and labour productivity growth. The technique is consistent with real GDP in the chained-Fisher index and has several desirable properties.
2. The framework distinguishes the industry contribution from changes in the industry output and changes in industry’s output price. It shows that over the period 1981-2000, the service sector was the major contributor to both real GDP growth and aggregate labour productivity growth.
3. The estimate of the contribution for the service sector is much higher than estimates using traditional methods that focus only on the quantity effect. By ignoring the price effect, traditional methods underestimate the contributions of service industries with rising real output prices to real GDP growth and aggregate labour productivity growth.
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