Obsolescence and productivity

Rio, Fernando del; Sampayo, Antonio

http://hdl.handle.net/10400.5/15722

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Authors

Rio, Fernando del

Sampayo, Antonio

Abstract(s)

The increase in the obsolescence of intangible capital caused by the adop- tion of new information technologies can play an important role in accounting for the productivity slowdown undergone by the US economy since 1974. To explore this hypothesis, we have developed a standard growth model with physical and intangi- ble capital in which technical progress is equipment–specific. We assume that the obsolescence of intangible capital increases when the equipment–specific techni- cal progress accelerates. The model is calibrated for the period 1957–1973 and the response of the economy to an increase in the rate of equipment–specific technical progress — as observed since 1974 — is simulated. We show that this setup can account for a large part of the post–1974 slowdown observed in productivity and in the Solow residual.