Roe, Terry L.

December, 1996

By: Gopinath, Munisamy; Roe, Terry L.
Sources of growth in U.S. gross domestic product (GDP) are analyzed in a general equilibrium, open economy framework using time-series data. Contributions from labor and capital account for 75% of the economy's average growth, with total factor productivity (TFP) accounting for the remainder. Changes in the domestic terms of trade appear to be biased in favor of the services sector and against the agricultural and industrial sectors. A number of Rybczynski and Stolper-Samuelson-like linkages between the agricultural sector and the rest of the economy are identified. Labor-using technological change and favorable terms of trade appear to be the major contributors to the growth of the services sector. These changes have led to a decline in the competitiveness of the industrial and agricultural sectors for economy-wide resources. Technological change has tended to be neutral toward the production of farm output.