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Quantifying embodied technological change

  • Plutarchos Sakellaris
  • Daniel J. Wilson

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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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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  1. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
  2. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
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  4. 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.
  5. Mark Doms & Timothy Dunne, 1994. "Capital Adjustment Patterns in Manufacturing Plants," Working Papers 94-11, Center for Economic Studies, U.S. Census Bureau.
  6. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  7. 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.
  8. 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.).
  9. Jeremy Greenwood & Boyan Jovanovic, 1998. "Accounting for Growth," NBER Working Papers 6647, National Bureau of Economic Research, Inc.
    • 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.
  10. repec:att:wimass:9116 is not listed on IDEAS
  11. 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).
  12. 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.
  13. Boyan Jovanovic & Rafael Rob, 1997. "Solow vs. Solow: Machine Prices and Development," NBER Working Papers 5871, National Bureau of Economic Research, Inc.
  14. 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.
  15. 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).
  16. 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).
  17. Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," NBER Working Papers 5260, National Bureau of Economic Research, Inc.
  18. 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.
  19. 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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  21. 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, June.
  22. 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.
  23. repec:umd:umdeco:sakellaris0001 is not listed on IDEAS
  24. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557.
  25. Jonathan Eaton & Samuel Kortum, 2004. "Trade in Capital Goods," Levine's Working Paper Archive 228400000000000019, David K. Levine.
  26. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, October.
  27. Plutarchos Sakellaris, 2001. "Patterns of plant adjustment," Finance and Economics Discussion Series 2001-05, Board of Governors of the Federal Reserve System (U.S.).
  28. 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.
  29. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
  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.
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