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Obsolescence and Productivity

  • Antonio R. Sampayo
  • Fernando del Río

In this paper we argue that the increase in the obsolescence costs caused by the adoption of new information technologies, can play an important role in accounting for the productivity slowdown undergone by the US economy after 1974. We develop a standard growth model with physical and intangible capital in which technical progress is embodied in equipment. In this framework, we assume that the obsolescence of intangible capital increases when the embodied technical progress accelerates. The model is calibrated for the period 1957-1973 and the response of the economy to an increase in the rate of embodied technical progress -as observed after 1974- is simulated. We show that the increase in the obsolescence cost caused by the acceleration of embodied technical progress can account for a large part of the productivity slowdown post-1974.

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Paper provided by FEDEA in its series Working Papers with number 2005-25.

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Handle: RePEc:fda:fdaddt:2005-25
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  1. Robert E. Hall, 2001. "The Stock Market and Capital Accumulation," American Economic Review, American Economic Association, vol. 91(5), pages 1185-1202, December.
  2. del Rio, Fernando, 2010. "Investment-specific technical progress, capital obsolescence and job creation," Labour Economics, Elsevier, vol. 17(1), pages 248-257, January.
  3. B. Zorina Khan, 2004. "Technological Innovations and Endogenous Changes in U.S. Legal Institutions, 1790-1920," NBER Working Papers 10346, National Bureau of Economic Research, Inc.
  4. Michael R. Pakko, 2005. "Changing technology trends, transition dynamics and growth accounting," Working Papers 2000-014, Federal Reserve Bank of St. Louis.
  5. Loo,J,van & Grip,A.,de & Steur,M.,de, 2001. "Skills Obsolescence: Causes and Cures," ROA Research Memorandum 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  6. Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2001. "Obsolescence and Modernization in the Growth Process," Economics Working Papers ECO2001/18, European University Institute.
  7. Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2002. "Embodied technological change learning-by-doing and the productivity slowdown," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  8. Carol Corrado & Charles R. Hulten & Daniel E. Sichel, 2004. "Measuring capital and technology: an expanded framework," Finance and Economics Discussion Series 2004-65, Board of Governors of the Federal Reserve System (U.S.).
  9. 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.
  10. McDowell, John M, 1982. "Obsolescence of Knowledge and Career Publication Profiles: Some Evidence of Differences among Fields in Costs of Interrupted Careers," American Economic Review, American Economic Association, vol. 72(4), pages 752-68, September.
  11. Michael R. Pakko, 2001. "What happens when the technology growth trend changes?: transition dynamics, capital growth and the "new economy"," Working Papers 2001-020, Federal Reserve Bank of St. Louis.
  12. Samaniego, Roberto M., 2006. "Organizational capital, technology adoption and the productivity slowdown," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1555-1569, October.
  13. Robert E. Hall, 2004. "Measuring Factor Adjustment Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 899-927.
  14. Klock, Mark & Megna, Pamela, 2000. "Measuring and valuing intangible capital in the wireless communications industry," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(4), pages 519-532.
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