Investment-Specific Technology Growth: Concepts and Recent Estimates

The strength of United States productivity growth in recent years has been attributed to technological improvements that are, in some sense, embodied in new types of capital equipment. However, traditional growth theory and growth accounting techniques -- which emphasize the role of disembodied, neutral technological progress -- are deficient in explaining this phenomenon. In this article, the author outlines a model of investment-specific technological change that has become popular for describing the notion of capital-embodied growth and summarizes some recent estimates of the importance of this type of technological progress for assessing United States productivity trends.