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The Production-Side Approach to Estimating Embodied Technological Change

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Author Info

  • Plutarchos Sakellaris

    ()
    (University of Maryland, University of Ioannina, and Federal Reserve Board)

  • Dan Wilson

    ()
    (University of Maryland)

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 University of Maryland, Department of Economics in its series Electronic Working Papers with number 00-002.

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Date of creation: Dec 2000
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Handle: RePEc:umd:umdeco:00-002

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Postal: Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742
Web page: http://www.econ.umd.edu/

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Postal: Ms. Elizabeth Martinez, Department of Economics, University of Maryland, Tydings Hall, College Park, MD 20742
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Keywords: technological change; production function estimation;

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References

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Burnside, A Craig & Eichenbaum, Martin & Rebelo, Sérgio, 1995. "Capital Utilization and Returns to Scale," CEPR Discussion Papers 1221, C.E.P.R. Discussion Papers.
  6. Plutarchos Sakellaris, 2001. "Patterns of plant adjustment," Finance and Economics Discussion Series 2001-05, Board of Governors of the Federal Reserve System (U.S.).
  7. Baily, Martin Neil & Bartelsman, Eric J. & Haltiwanger, John, 1995. "Labor productivity: structural change and cyclical dynamics," Serie Research Memoranda 0050, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  8. 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.
  9. 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).
  10. 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.
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  12. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
  13. 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.
  14. Plutarchos Sakellaris, 2000. "Patterns of Plant Adjustment," Electronic Working Papers 00-001, University of Maryland, Department of Economics.
  15. Gort, Michael & Wall, Richard A., 1998. "Obsolescence, input augmentation, and growth accounting," European Economic Review, Elsevier, vol. 42(9), pages 1653-1665, November.
  16. 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.
  17. 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.
  18. 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.
  19. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  20. Mark E Doms, 1992. "Estimating Capital Efficiency Schedules Within Production Functions," Working Papers 92-4, Center for Economic Studies, U.S. Census Bureau.
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  22. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
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  24. 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.
  25. 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.
  26. 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.
  27. Shea, John, 1993. "Do Supply Curves Slope Up?," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 1-32, February.
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Citations

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Cited by:
  1. Daniel Wilson, 2003. "Embodying Embodiment in a Structural, Macroeconomic Input-Output Model," Economic Systems Research, Taylor & Francis Journals, vol. 15(3), pages 371-398.
  2. Frank R. Lichtenberg, 2009. "The Quality of Medical Care, Behavioral Risk Factors, and Longevity Growth," NBER Working Papers 15068, National Bureau of Economic Research, Inc.
  3. John Laitner & Dmitriy Stolyarov, 2003. "Technological Change and the Stock Market," American Economic Review, American Economic Association, vol. 93(4), pages 1240-1267, September.
  4. Boyan Jovanovic & Peter L. Rousseau, 2002. "Moore's Law and Learning-By-Doing," NBER Working Papers 8762, National Bureau of Economic Research, Inc.
  5. Frank R. Lichtenberg, 2002. "The Effect of Changes in Drug Utilization on Labor Supply and Per Capita Output," NBER Working Papers 9139, National Bureau of Economic Research, Inc.
  6. Frank R. Lichtenberg & Suchin Virabhak, 2002. "Pharmaceutical-embodied technical progress, longevity, and quality of life: drugs as "equipment for your health"," NBER Working Papers 9351, National Bureau of Economic Research, Inc.
  7. Frank R. Lichtenberg & Gautier Duflos, 2008. "Pharmaceutical innovation and the longevity of Australians: a first look," NBER Working Papers 14009, National Bureau of Economic Research, Inc.
  8. Frank R. Lichtenberg, 2005. "Pharmaceutical Knowledge-Capital Accumulation and Longevity," NBER Chapters, in: Measuring Capital in the New Economy, pages 237-274 National Bureau of Economic Research, Inc.

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