DP10275 Measuring the bias of technological change

Author(s): Ulrich Doraszelski, Jordi Jaumandreu
Publication Date: November 2014
Keyword(s): biased technological change, production function estimation, productivity
JEL(s): D24, L60, O30
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10275

Technological change can increase the productivity of the various factors of production in equal terms or it can be biased towards a specific factor. We develop an estimator for production functions when productivity is multi-dimensional. We directly assess the bias of technological change by measuring, at the level of the individual firm, how much of it is factor neutral and how much is labor augmenting. Applying our estimator to panel data from Spain, we find that technological change is indeed biased, with both its factor-neutral and its labor-augmenting component causing output to grow by about 2% per year.