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Technical Progress and the Natural Rate in Models of the UK Economy

Published online by Cambridge University Press:  26 March 2020

Keith B. Church ,
Peter R. Mitchell ,
Joanne E. Sault  and
Kenneth F. Wallis
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Abstract

This article analyses the role of technical progress in three models of the UK economy. In the standard neoclassical growth model, the growth of the economy is dictated by the growth rate of technical progress plus that of the population. Our two simulation experiments, increasing the level of technical progress by 1 per cent and the growth rate by 0.1 percentage points, suggest that technological progress plays the same role in these large macroeconometric models. In both cases the result is higher output and real wages. However adjustment following the shocks is protracted, giving substantial technological unemployment which in several instances is permanent.

Type
Articles
Information
National Institute Economic Review , Volume 164 , April 1998 , pp. 80 - 89
Copyright
Copyright © 1998 National Institute of Economic and Social Research

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Footnotes

∗

A previous version of this paper was presented at an ESRC conference on Macroeconomic Modelling and Economic Policy, London, 8-9 January 1998. This research is supported by a grant from the Economic and Social Research Council.

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