Investment-specific technological progress: Difference between revisions

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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|last=Greenwood|first=Jeremy|url=https://www.worldcat.org/oclc/290503961|title=New developments in productivity analysis - Accounting for Growth|last2=Jovanovic|first2=Boyan|date=2001|publisher=University of Chicago Press|others=Hulten, Charles R., Dean, Edwin., Harper, Michael J., Conference on Research in Income and Wealth.|year=|isbn=0-226-36064-4|___location=Chicago|pages=|oclc=290503961}}</ref>.

==Market Significance==

Identifying ''investment-specific'' technological progress iswithin important,an because[[economy]] knowingwill whatdetermine typehow ofan technologicalindividual progress is operatingbehaves in anreaction [[economy]]to willnew determinetechnology, howi.e. someonewhether (should)the wantindividual hiswill orinvest hertheir [[taxsavings]]<ref>{{Cite dollarsjournal|last=Gort|first=Michael|last2=Greenwood|first2=Jeremy|last3=Rupert|first3=Peter|date=March to1, be1999|title=How spentMuch andof howEconomic heGrowth oris sheFueled mayby wantInvestment-Specific toTechnological investChange?|url=https://www.clevelandfed.org/en/newsroom-and-events/publications/economic-commentary/economic-commentary-archives/1999-economic-commentaries/ec-19990301-how-much-of-economic-growth-is-fueled-by-investment-specific-technological-progress.aspx|journal=Economic hisCommentary|publisher=Federal orReserve herBank [[savings]]of (Gort et al. 1999)Cleveland|volume=|pages=1|via=}}</ref>. If "investment-specific" technological change is the main source of progress, thenin onean would[[industry]], wantthen histhe orindividual herwould dollarsinvest spent on helpingin firms buyto new equipmentpurchase and renovatedevelop theirnew plantscapital, becauseas thesetechnological investmentsimprovements willresult improvein productionimprovements andto hencethe whatgoods youavailable to consume. Furthermore, oneFirms may wantalso choose to help pay fortrain current employee trainingemployees in usingthe new technologies (to keep them up to date)technology or subsidize the education of new employees (who will enterin the joboperation market knowing how to useof the new technology). So,As the type ofsuch technological progress willhas alsoan matterimpact for unemployment and education issues. Finally, if technological progress is "investment-specific" you may want to direct your money towardsupon the researchlabour andmarket development (R & D) of new technologies (like quantum computers or alternative energy sources) (Krusell 1998).<ref>{{Citation

| 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}}</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 | last=Greenwood | first=Jeremy | last2=Vandenbroucke | first2=Guillaume | year=2006 | chapter= Hours Worked: Long-Run Trends

More generally, why is any type of technological progress important? Technological change has made humans lives' easier. Because of technological progress, people can work less, make more money and enjoy more leisure time (Greenwood & Vandenbroucke 2006). Women have been able to break away from the traditional "[[housewife]]" role, join the labor-force in greater numbers (Greenwood et al. 2005) and become less economically dependent on men (Greenwood & Guner 2009). Finally, technological progress has been shown to affect the fall in [[child labor]] starting around 1900 (Greenwood & Seshadri 2005). Figure 1 illustrates this last point: in 1900 child labor's share of the paid labor force began to fall.

| 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 (Greenwood et al. 2005) and become less economically dependent on men (Greenwood & Guner 2009). Further impacts include a reduction in [[child labor]] starting around 1900 <ref>{{Citation| last=Greenwood | first=Jeremy | last2=Seshadri | first2=Ananth| year=2005 | chapter=Technological Progress and Economic Transformation | editor= Philippe Aghion and Steven N. Durlauf | title=Handbook of Economic Growth | publisher=Elsevier North-Holland | place=Amsterdam}}.</ref>.

[[Image:kid1.jpg|thumb|400px|center|Figure 1]]

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| editor=Charles R. Hulten, Edwin R. Dean & Michael J. Harper

| title=New Developments in Productivity Analysis | publisher=University of Chicago Press | place=Chicago }}.

* {{Citation

| last=Greenwood | first=Jeremy | last2=Seshadri | first2=Ananth

| year=2005

| chapter=Technological Progress and Economic Transformation

| editor= Philippe Aghion and Steven N. Durlauf

| title=Handbook of Economic Growth

| publisher=Elsevier North-Holland | place=Amsterdam}}.

* {{Citation

| last=Greenwood | first=Jeremy | last2=Seshadri | first2=Ananth

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| issue=1 | year=2005 | pages=109–133

| doi=10.1111/0034-6527.00326 }}.

* {{Citation

| last=Greenwood | first=Jeremy | last2=Vandenbroucke | first2=Guillaume

| year=2006 | chapter= Hours Worked: Long-Run Trends

| editor=Lawrence E. Blume, Steven N. Durlauf

| title=The New Palgrave Dictionary of Economics

| edition=2nd | publisher=Palgrave Macmillan | place=London }}.

* {{Citation

| 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}}.

* {{Citation

| last=Lebergott | first=Stanley