Evolution of the Relative Price of Goods and Services in a Neoclassical Model of Capital Accumulation

This paper provides an explanation for the secular increase in the price of services relative to that of manufactured goods that relies on capital accumulation rather than on an exogenous total factor productivity growth differential. The key assumptions of the two-sector, intertemporal optimizing m...

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Main Author: Klyuev, Vladimir
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2004, 2004
Series:IMF Working Papers; Working Paper
Subjects:
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Collection: International Monetary Fund - Collection details see MPG.ReNa
Summary:This paper provides an explanation for the secular increase in the price of services relative to that of manufactured goods that relies on capital accumulation rather than on an exogenous total factor productivity growth differential. The key assumptions of the two-sector, intertemporal optimizing model are relatively high capital intensity in the production of goods and limited cross-border capital mobility, allowing the interest rate to vary. With plausible parameterization, the model also predicts a decline in the employment share of the goods sector over time
Physical Description:18 p.
ISBN:9781451874686
1451874685