Growth Accounting When Technical Change is Embodied in Capital

38 Pages Posted: 15 Jan 2007  

Charles R. Hulten

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 1992

Abstract

Many technological innovations are introduced through improvements in the design of new investment goods, thus raising the possibility that capital-embodied technical change may be a significant source of total factor productivity growth. There are, however, no systematic estimates of the size of the embodiment effect. This paper attempts to fill this gap by merging the estimates of quality change obtained from the price literature on quality change with a version of the conventional sources of growth model which allows for both embodied and disembodied technical change. This resulting estimates suggest that as much as 20 percent of the total factor productivity in growth U.S. manufacturing industry over the period 1949-83 is due to the embodiment effect. It is also found that for the equipment used in U.S. manufacturing, best practice technology may be as much as 23 percent above the average level of technical efficiency.

Suggested Citation

Hulten, Charles R., Growth Accounting When Technical Change is Embodied in Capital (January 1992). NBER Working Paper No. w3971. Available at SSRN: https://ssrn.com/abstract=476133

Charles R. Hulten (Contact Author)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

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