Investment-specific technical change in the US (1947-2000): measurement and macroeconomics consequences

By Jason G. Cummins, Giovanni L. Violante. 2002

323 citations recorded by the source corpus.

By extrapolating Gordon's (1990) measures of the quality-bias in the official price indexes, we construct quality-adjusted price indexes for 24 types of equipment and software (E&S) from 1947 to 2000 and use them to measure technical change at the aggregate and at the industry level. Technological improvement in E&S accounts for an important fraction of postwar GDP growth and plays a key role in the productivity resurgence of the 1990s. Driving this finding is 4 percent annual growth in the quality of E&S in the postwar period and more than 6 percent annual growth in the 1990s. The acceleration in the 1990s occurred in every industry, consistent with the idea that information technology represents a general purpose technology. Furthermore, we measure for the aggregate economy and different sectors the "technological gap": how much more productive new machines are compared to the average machine. We show that the technological gap explains the dynamics of investment in new technologies and the returns to human capital, consistent with Nelson and Phelps' (1966) conjecture. Since the technological gap continues to increase --- it more than doubled in the past 20 years --- our evidence supports the view that at least some of the recent increase in productivity growth is sustainable.

Subfields: Economics and Econometrics, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/cc272edbed1cfd980d2f341544bcc5b946a859ec

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Citations in the corpus

The Dynamic Effects of Neutral and Investment‐Specific Technology Shocks (2006, background): “Greenwood et al. use a rough bias adjustment to extend Gordon’s original sample, whereas Cummins and Violante (2002) systematically update the Gordon series.”
US-Europe Differences in Technology-Driven Growth: Quantifying the Role of Education (2003, background): “Cummings and Violante (2002) compute an aggregate index of investment-specific (embodied) technical change, and report that it grew at a rate of 3% a year until 1975 and reached an average annual rate in excess of 6% in the 90s.”
Learning and Shifts in Long-Run Productivity Growth (2004, result): “Following on the results of Cummins and Violante (2002), who emphasize the importance in the 1990s of shifts in the growth rate of productivity in the investment-goods sector, we analyze shifts both to aggregate total factor productivity (TFP) and to TFP in the investment goods sector alone.”
Specialization on a technologically stagnant sector need not be bad for growth (2007, unknown): “ct = (kt) ® and it = A (kt ¡ kt) ; (4)”
Letting Different Views about Business Cycles Compete (2010, methodology): “Following Fisher (2006), we use the relative price of investment to help identify IST shocks.”
The Changing Roles of Education and Ability in Wage Determination (2014, methodology): “We use data from Cummins and Violante (2002) and also employ two additional measures of real equipment prices, National Income and Product Accounts (NIPA) official price index of E&S and the price of computers and peripheral (C&P) equipment.”
Investment shocks and business cycles (2010, background): “INVESTMENT SHOCKS AND BUSINESS CYCLES 24 with theory (Gordon (1990), Cummins and Violante (2002)).”
Medium-Term Business Cycles (2006, unknown): “The relative price of capital is the quality adjusted price of equipment and structures from Cummins and Violante (2002) (which is in turn based on Gordon (1990)) divided by the BEA price of non-durable consumption and services.”
Capital stocks, capital services, and depreciation: an integrated framework (2003, background): “This is the difference between what Oliner (1993) and (1994) calls ‘full’ and ‘partial’ depreciation; see also Cummins and Violante (2002). He argues that the BEA was guilty of this error in its estimates of computer stocks.”
Investment Shocks and Asset Prices (2011, methodology): “I obtain the relative price of investment goods from Israelsen (2010), who extends the quality-adjusted investment price series constructed by Gordon (1990) and Cummins and Violante (2002) through 2008.”
News Driven Business Cycles: Insights and Challenges (2014, methodology): “This formulation is for example used in Davis [2007], Christiano, Ilut, Motto, and Rostagno [2010] and in one of the examples of Beaudry and Portier [2006].”
The Firm Size Distribution Across Countries and Skill-Biased Change in Entrepreneurial Technology (2018, background): “At the same time, Cummins and Violante (2002) find that the gap between the frontier and average technology in use has been increasing in the U.S. over the entire span of their data (1947-2000), implying that firms have not all benefitted equally from technology improvements.”
Technology Shocks and Aggregate Fluctuations (2004, unknown): “Using times series for labor productivity, per capita hours, and the price of equipment (as a ratio to the consumption goods deflator) constructed by Cummins and Violante (2002), Fisher estimates impulse responses to the two types of shocks, and their relative contribution to business cycle…”