Investment-specific technological progress: Difference between revisions

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One approach to measuring the price of technologically improved structures is to assign newer building a higher value due to the embodyment of the new technology with the design.<ref>{{Citation | last1=Gort | first1=Michael | last2=Greenwood | first2=Jeremy | last3=Rupert | first3=Peter | title=How Much of Economic Growth is Fueled by Investment-Specific Technological Change? | journal=Economic Commentary, Federal Reserve Bank of Cleveland | date=March 1, 1999 }} </ref> In particular, they should rent for more, i.e. renting a square foot in a new building is much more expensive than renting a square foot in a building forty years old.

[[ImageFile:figure4Rent in dollars per square foot, as function of age in years.jpg|thumb|400px|center|Figure 3]]

Figures 2 and 3 suggest that '''investment-specific''' technological change is operating in the US. The annual rate of technological progress in equipment and structures has been estimated to be about 3.2% and 1%, respectively.<ref>{{Citation | last1=Greenwood | first1=Jeremy | last2=Hercowitz | first2=Zvi | last3=Krusell | first3=Per |author-link3=Per Krusell | title=Long-Run Implications of Investment-Specific Technological Change | journal= American Economic Review | volume=87 | issue=3 | year=1997 | pages=342–362}} </ref>