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IT and Beyond: The Contribution of Heterogenous Capital to Productivity

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  • Daniel Wilson

Abstract

This paper explores the relationship between capital composition and productivity using a unique and remarkably detailed data set on firm-level, asset-specific investment in the U.S. Using cross-sectional and longitudinal regressions, I find that among all types of capital, only computers, communications equipment, software, and office building are associated (positively) with current and subsequent years’ multifactor productivity. The link between offices and productivity, however, is shown to be due to the correlation between the use of offices and organizational capital. In contrast, the link between ICT equipment and productivity is robust to a number of controls and appears to be part causal effect and part reflection of the correlation between ICT and firm fixed (or slow-moving) effects. The implied marginal products by capital type are derived and compared to official data on rental prices; substantial differences exist for a number of key capital types. Lastly, I provide evidence of complementaries and substitutabilities among capital types — a rejection of the common assumption of perfect substitutability — and between particular capital types and labor.

Suggested Citation

  • Daniel Wilson, 2004. "IT and Beyond: The Contribution of Heterogenous Capital to Productivity," Working Papers 04-20, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:04-20
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    More about this item

    Keywords

    Capital Heterogeneity; Productivity; Investment; Production Function Estimation;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D29 - Microeconomics - - Production and Organizations - - - Other

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