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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page The Production-Side Approach to Estimating Embodied Technological Change
Plutarchos Sakellaris and Daniel J. Wilson
2001-20


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.

Keywords: Productivity growth, embodied technological change, equipment investment, plant, producer durable price index

Full paper (400 KB PDF)


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Last update: April 26, 2001