IDEAS VERSUS RIVAL HUMAN-CAPITAL - INDUSTRY EVIDENCE ON GROWTH-MODELS

Using 1959-1991 growth rates for 449 4-digit US manufacturing industri es, I test 'idea' and 'rival human capital' models of endogenous growt h. I find the following: First, TFP growth is faster in industries tha t are more intensive in capital and intermediate goods and less intens ive in labor, favoring idea models over rival human capital models. Se cond, industries with rapidly declining prices for their capital and i ntermediate goods exhibit above-average TFP growth, which one would ex pect if improvements in variety and quality are only partially measure d by output deflators: understated price declines upstream translate i nto higher measured TFP growth downstream. (C) 1998 Elsevier Science B .V. All rights reserved.