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The Production-Side Approach to Estimating Embodied Technological Change

Author

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  • 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.

Suggested Citation

  • Plutarchos Sakellaris & Dan Wilson, 2000. "The Production-Side Approach to Estimating Embodied Technological Change," Electronic Working Papers 00-002, University of Maryland, Department of Economics.
    • Handle: RePEc:umd:umdeco:00-002
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    References listed on IDEAS

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    Cited by:

    1. Frank R. Lichtenberg & Suchin Virabhak, 2007. "Pharmaceutical-embodied technical progress, longevity, and quality of life: drugs as 'Equipment for Your Health'," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 371-392.
    2. Boyan Jovanovic & Peter L. Rousseau, 2002. "Moore's Law and Learning-By-Doing," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 346-375, April.
    3. Frank R. Lichtenberg & Gautier Duflos, 2008. "Pharmaceutical innovation and the longevity of Australians: A first look," Advances in Health Economics and Health Services Research, in: Beyond Health Insurance: Public Policy to Improve Health, pages 95-117, Emerald Group Publishing Limited.
    4. Daniel Wilson, 2003. "Embodying Embodiment in a Structural, Macroeconomic Input-Output Model," Economic Systems Research, Taylor & Francis Journals, vol. 15(3), pages 371-398.
    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. John Laitner & Dmitriy Stolyarov, 2003. "Technological Change and the Stock Market," American Economic Review, American Economic Association, vol. 93(4), pages 1240-1267, September.
    7. Frank Lichtenberg, 2011. "The quality of medical care, behavioral risk factors, and longevity growth," International Journal of Health Economics and Management, Springer, vol. 11(1), pages 1-34, March.
    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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    More about this item

    Keywords

    technological change; production function estimation;

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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