IDEAS home Printed from https://ideas.repec.org/a/red/issued/v7y2004i1p1-26.html
   My bibliography  Save this article

Quantifying Embodied Technological Change

Author

Listed:
  • Plutarchos Sakellaris

    (University of Maryland and AUEB)

  • Daniel J. Wilson

    (Federal Reserve Bank of San Francisco)

Abstract

We estimate the rate of embodied technological change directly from plant-level manufacturing data on current output and input choices along with histories on their vintages of equipment investment. Our estimates range between 8 and 17 percent for the typical U.S. manufacturing plant during the years 1972-1996. Any number in this range is substantially larger than is conventionally accepted with some important implications. First, the role of investment-specific technological changeas an engine of growth is even larger than previously estimated. Second, existing producer durable price indices do not adequately account for quality change. As a result, measured capital stock growth is biased. Third, if accurate, the Hulten and Wykoff (1981) economic depreciation rates may primarily reflect obsolescence. (Copyright: Elsevier)

Suggested Citation

  • Plutarchos Sakellaris & Daniel J. Wilson, 2004. "Quantifying Embodied Technological Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 1-26, January.
  • Handle: RePEc:red:issued:v:7:y:2004:i:1:p:1-26
    DOI: 10.1016/S1094-2025(03)00052-8
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1016/S1094-2025(03)00052-8
    File Function: Full text
    Download Restriction: Access to full texts is restricted to ScienceDirect subscribers and ScienceDirect institutional members. See http://www.sciencedirect.com/ for details.

    File URL: https://libkey.io/10.1016/S1094-2025(03)00052-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. John Shea, 1993. "Do Supply Curves Slope Up?," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 1-32.
    2. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    3. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
    4. Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "1974," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 49-95, June.
      • Greenwood, J. & Yorukoglu, M., 1996. "1974," RCER Working Papers 429, University of Rochester - Center for Economic Research (RCER).
    5. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 2000. "The role of investment-specific technological change in the business cycle," European Economic Review, Elsevier, vol. 44(1), pages 91-115, January.
    6. Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters, in: New Developments in Productivity Analysis, pages 179-224, National Bureau of Economic Research, Inc.
    7. McHugh, Richard & Lane, Julia, 1987. "The Age of Capital, the Age of Utilized Capital, and Tests of the Embodiment Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 362-367, May.
    8. Eaton, Jonathan & Kortum, Samuel, 2001. "Trade in capital goods," European Economic Review, Elsevier, vol. 45(7), pages 1195-1235.
    9. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    10. Martin Neil Baily & Eric J. Bartelsman & John Haltiwanger, 2001. "Labor Productivity: Structural Change And Cyclical Dynamics," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 420-433, August.
    11. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
    12. Susanto Basu & John Fernald, 2001. "Why Is Productivity Procyclical? Why Do We Care?," NBER Chapters, in: New Developments in Productivity Analysis, pages 225-302, National Bureau of Economic Research, Inc.
    13. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Capital Utilization and Returns to Scale," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 67-124, National Bureau of Economic Research, Inc.
    14. Mark E. Doms & Timothy Dunne, 1998. "Capital Adjustment Patterns in Manufacturing Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 409-429, April.
    15. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-362, June.
    16. Boyan Jovanovic & Rafael Rob, 1997. "Solow vs. Solow: Machine Prices and Development," NBER Working Papers 5871, National Bureau of Economic Research, Inc.
    17. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    18. John Haltiwanger & Russell Cooper & Laura Power, 1999. "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, American Economic Association, vol. 89(4), pages 921-946, September.
    19. Sakellaris, Plutarchos, 2004. "Patterns of plant adjustment," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 425-450, March.
    20. R. E. Hall, 1968. "Technical Change and Capital from the Point of View of the Dual," Review of Economic Studies, Oxford University Press, vol. 35(1), pages 35-46.
    21. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
    22. Franklin M. Fisher, 1965. "Embodied Technical Change and the Existence of an Aggregate Capital Stock," Review of Economic Studies, Oxford University Press, vol. 32(4), pages 263-288.
    23. Timothy Dunne, 1991. "Technology Usage in U.S. Manufacturing Industries: New Evidence from the Survey of Manufacturing Technology," Working Papers 91-7, Center for Economic Studies, U.S. Census Bureau.
    24. D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
    25. Gort, Michael & Wall, Richard A., 1998. "Obsolescence, input augmentation, and growth accounting," European Economic Review, Elsevier, vol. 42(9), pages 1653-1665, November.
    26. repec:umd:umdeco:sakellaris0001 is not listed on IDEAS
    27. Laura Power, 1998. "The Missing Link: Technology, Investment, And Productivity," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 300-313, May.
    28. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276, National Bureau of Economic Research, Inc.
    29. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-980, September.
    30. Huggett, Mark & Ospina, Sandra, 2001. "Does productivity growth fall after the adoption of new technology?," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 173-195, August.
    31. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 561-583, August.
    32. Stephen D. Oliner, 1993. "Constant-Quality Price Change, Depreciation, and Retirement of Mainframe Computers," NBER Chapters, in: Price Measurements and Their Uses, National Bureau of Economic Research, Inc.
    33. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, October.
    34. Bartelsman, Eric J & Caballero, Ricardo J & Lyons, Richard K, 1994. "Customer- and Supplier-Driven Externalities," American Economic Review, American Economic Association, vol. 84(4), pages 1075-1084, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Plutarchos Sakellaris & Dan Wilson, 2000. "The Production-Side Approach to Estimating Embodied Technological Change," Electronic Working Papers 00-002, University of Maryland, Department of Economics.
    2. Plutarchos Sakellaris & Daniel J. Wilson, 2004. "Quantifying Embodied Technological Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 1-26, January.
    3. Samaniego, Roberto M., 2008. "Can technical change exacerbate the effects of labor market sclerosis," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 497-528, February.
    4. James Bessen, 2002. "Technology Adoption Costs and Productivity Growth: The Transition to Information Technology," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 443-469, April.
    5. Daniel J. Wilson, 2002. "Is Embodied Technology the Result of Upstream R&D? Industry-Level Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 285-317, April.
    6. Jason G. Cummins & Giovanni L. Violante, 2002. "Investment-Specific Technical Change in the US (1947-2000): Measurement and Macroeconomic Consequences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 243-284, April.
    7. Raouf Boucekkine & David De la Croix & Omar Licandro, 2011. "Vintage Capital Growth Theory: Three Breakthroughs," Working Papers 565, Barcelona School of Economics.
    8. Sakellaris, Plutarchos, 2004. "Patterns of plant adjustment," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 425-450, March.
    9. Stephen L. Parente, 2000. "Learning-by-Using and the Switch to Better Machines," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 675-703, October.
    10. Pinar Geylani & Spiro Stefanou, 2013. "Linking investment spikes and productivity growth," Empirical Economics, Springer, vol. 45(1), pages 157-178, August.
    11. Voon, Jan P. & Chen, Edward K. Y., 2003. "Contributions of capital stock quality improvement to economic growth: the case of Hong Kong," Journal of Asian Economics, Elsevier, vol. 14(4), pages 631-644, August.
    12. Hulten, Charles R., 2010. "Growth Accounting," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 987-1031, Elsevier.
    13. Michele Cavallo & Anthony Landry, 2018. "Capital-Goods Imports and US Growth," Staff Working Papers 18-1, Bank of Canada.
    14. Charles R. Hulten, 2000. "Total Factor Productivity: A Short Biography," NBER Working Papers 7471, National Bureau of Economic Research, Inc.
    15. Maliranta, Mika, 1998. "Factors of Productivity Performance by Plant Generation:Some findings from Finnish manufacturing," Discussion Papers 634, The Research Institute of the Finnish Economy.
    16. Sakellaris, Plutarchos & Vijselaar, Focco, 2004. "Capital quality improvement and the sources of growth in the euro area," Working Paper Series 368, European Central Bank.
    17. Douglas W Dwyer, 1995. "Technology Locks, Creative Destruction And Non-Convergence In Productivity Levels," Working Papers 95-6, Center for Economic Studies, U.S. Census Bureau.
    18. Jorge Duran & Omar Licandro, 2015. "Is the output growth rate in NIPA a welfare measure?," Discussion Papers 2015/18, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    19. Douglas Dwyer, 1998. "Technology Locks, Creative Destruction, and Non-Convergence in Productivity Levels," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 430-473, April.
    20. Cooley, Thomas F. & Greenwood, Jeremy & Yorukoglu, Mehmet, 1997. "The replacement problem," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 457-499, December.

    More about this item

    Keywords

    productivity growth; embodied technological change; equipment investment; plant; producer durable price index.;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:issued:v:7:y:2004:i:1:p:1-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.