Ideas versus rival human capital: Industry evidence on growth models

Using 1959—1991 growth rates for 449 4-digit US manufacturing industries, I test ‘idea’ and ‘rival human capital’ models of endogenous growth. I find the following: First, TFP growth is faster in industries that are more intensive in capital and intermediate goods and less intensive in labor, favoring idea models over rival human capital models. Second, industries with rapidly declining prices for their capital and intermediate goods exhibit above-average TFP growth, which one would expect if improvements in variety and quality are only partially measured by output deflators: understated price declines upstream translate into higher measured TFP growth downstream. ( 1998 Elsevier Science B.V. All rights reserved. JEL classification: J24; L16; O3; O41