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'''Investment-specific technological progress''' refers to progress that requires [[investment]] in new equipment and structures embodying the latest technology in order to realize its benefits. To model the influence of [[technological change]] upon production the influence of a technological change upon the specific inputs (i.e. [[Labour (economics)|labor]] and [[Capital (economics)|capital]]) of a [[Production theory basics|production]] model is assessed in terms of the resulting effect upon the [[final good]] of the model (i.e. goods and services).
To realize the benefits of such technological change for production a [[business|firm]] must invest to attain the new technology as a component of production. For example, the advent of the [[Integrated circuit|microchip]] (an important technological improvement in computers) will affect the production of [[Ford]] cars only if Ford Motor Co.'s assembly plants invest in [[computers]] with microchips (instead of computers with [[punched cards]]) and use them in the production of a product, i.e. [[Ford Mustang|Mustangs]]. Investment-specific technological progress requires investing in new production inputs which contain or embody the latest technology. Notice that the term investment can be general: not only must a firm buy the new technology to reap its benefits, but it also must invest in training its workers and [[management|managers]] to be able to use this new technology<ref>{{Cite book|
==Significance==
Identifying ''investment-specific'' technological progress within an [[economy]] will determine how an individual behaves in reaction to new technology, i.e. whether the individual will invest their [[savings]]<ref>{{Cite journal|
| last=Krusell | first=Per
| title= Investment-Specific R and D and the Decline in the Relative Price of Capital
| journal= Journal of Economic Growth | volume=3
| issue=2 | year=1998 | pages=131–141 | doi=10.1023/a:1009701518509| s2cid=154164754
}}</ref>. Technological progress has direct positive impacts upon human [[welfare economics|welfare]]. As a result of new technologies producers can produce a greater volume of product at a lower cost. The resulting reduction in prices benefits the consumer, who now can purchase more. <ref>{{Citation |
| editor=Lawrence E. Blume, Steven N. Durlauf | title=The New Palgrave Dictionary of Economics | edition=2nd | publisher=Palgrave Macmillan | place=London }}</ref>. Women have been able to break away from the traditional "[[housewife]]" role, join the labor-force in greater numbers and become less economically dependent on men <ref>{{Citation |
[[Image:kid1.jpg|thumb|400px|center|Figure 1]]
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==A simple example: the microwave oven==
An example of investment-specific technological progress is the [[microwave oven]]. The first microwave oven cost between $2000 and $3000 US and was housed in refrigerator-sized cabinets. Through regular technological investment the microwave industry has developed into a competitive market, with small compact units in many households <ref> {{Citation
| last=Gallawa | first=J. Carlton | title=Who Invented Microwaves | url= http://www.gallawa.com/microtech/history.html| year=2005}}</ref>. Many industries have adopted the microwave through capital or research investment, applications outside the food industry include the [[iron]] and [[steel]] industry as a heating tool<ref>{{Cite journal|
==Measurement==
There is no direct metric for measuring technological progress, as such workarounds based upon direct relationships between technological progress and recordable values are used. "'Investment-specific'" technological progress makes producing goods easier, as a result the price of the goods will decrease. In particular, "investment-specific" technological advance has affected the prices of two inputs into the production process: equipment and structures. If there is technological progress in the production of these goods, then it is expected the price will fall or the value of the good will rise relative to older versions of the same good.
Figure 2 (the pink line) shows how the price of new [[Durable good|producer durables]] (such as equipment) in the United States relative to the price of new consumer nondurables has consistently declined over the past fifty years <ref>{{Citation |
with the quality of the goods increasing while the cost of production decreases. When changes in quality are not taken into account the apparent price of equipment undergoes a smaller reduction (see the black line in Figure 2).
[[File:Investment-specific technological progress - Figure 2.jpg|thumb|400px|center|Figure 2]]
One approach to measuring the price of technologicaly improved structures is to assign newer building a higher value due to the embodyment of the new technology with the design <ref>{{Citation |
[[Image:figure4.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 |
==References==
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