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Quantifying embodied technological change

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  • Plutarchos Sakellaris
  • Daniel J. Wilson

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 change as 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.

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Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2001-16.

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Date of creation: 2001
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Publication status: Published in Review of Economic Dynamics, vol. 7, no. 1 , January 2004, Pages 1-26
Handle: RePEc:fip:fedfwp:2001-16

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Keywords: Technology ; Productivity;

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References

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  1. 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.
  2. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
  3. Martin N. Baily & Eric J. Bartelsman & John Haltiwanger, 1996. "Labor productivity: structural change and cyclical dynamics," Finance and Economics Discussion Series 96-10, Board of Governors of the Federal Reserve System (U.S.).
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  5. Burnside, C & Eichenbaum, M & Rebelo, S, 1995. "Capital Utilization and Returns to Scale," RCER Working Papers 402, University of Rochester - Center for Economic Research (RCER).
  6. 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.
  7. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1998. "The Role of Investment-Specific Technological Change in the Business Cycle," RCER Working Papers 449, University of Rochester - Center for Economic Research (RCER).
  8. Susanto Basu & John Fernald, 2000. "Why Is Productivity Procyclical? Why Do We Care?," NBER Working Papers 7940, National Bureau of Economic Research, Inc.
  9. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
  10. Mark Doms & Timothy Dunne, 1994. "Capital Adjustment Patterns in Manufacturing Plants," Working Papers 94-11, Center for Economic Studies, U.S. Census Bureau.
  11. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, octubre-d.
  12. 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.
  13. 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.
  14. Jonathan Eaton & Samuel Kortum, 2004. "Trade in Capital Goods," Levine's Working Paper Archive 228400000000000019, David K. Levine.
  15. Stephen D. Oliner, 1990. "Constant-quality price change, depreciation, and retirement of mainframe computers," Working Paper Series / Economic Activity Section 110, Board of Governors of the Federal Reserve System (U.S.).
  16. Greenwood, J. & Yorukoglu, M., 1996. "1974," RCER Working Papers 429, University of Rochester - Center for Economic Research (RCER).
  17. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, February.
  18. Boyan Jovanovic & Rafael Rob, 1997. "Solow vs. Solow: Machine Prices and Development," NBER Working Papers 5871, National Bureau of Economic Research, Inc.
  19. 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.
  20. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  21. Shea, John, 1993. "Do Supply Curves Slope Up?," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 1-32, February.
  22. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
  23. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  24. 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 1075-84, September.
  25. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  26. Plutarchos Sakellaris, 2000. "Patterns of Plant Adjustment," Electronic Working Papers 00-001, University of Maryland, Department of Economics.
  27. Richard McHugh & Julia Lane, 1986. "The age of capital, the age of utilized capital, and tests of the embodiment hypothesis," Working Papers 86-4, Federal Reserve Bank of Philadelphia.
  28. 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 561-83, August.
  29. repec:umd:umdeco:sakellaris0001 is not listed on IDEAS
  30. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-80, September.
  31. Plutarchos Sakellaris, 2001. "Patterns of plant adjustment," Finance and Economics Discussion Series 2001-05, Board of Governors of the Federal Reserve System (U.S.).
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