 Technology Overload? Macroeconomic Implications of Accelerated ObsolescenceSeda Basihos Janeway Institute Working Papers from Faculty of Economics, University of Cambridge Abstract: Since the mid-1990s computing revolution, advanced economies have shown several striking regularities. After a decade-long boom, labor productivity growth has slowed, falling below its historical trend. Meanwhile, the labor share has declined sharply, and capital efficiency has decreased. This paper argues that these developments are not isolated but reflect a common structural change, with one possible driver being the faster obsolescence of capital in use due to the rapid advances of the computing revolution. Evidence from U.S. data suggests a significant rise in the capital obsolescence rate. To interpret these dynamics, I draw on an endogenous growth model of the U.S. economy. The model shows that while accelerated capital replacement initially boosts productivity, it ultimately leads to less effective use of resources under labor–capital complementarity, because labor skill creation lags behind the rapid introduction of new capital. As a result, the long-run outcomes under this regime are slower productivity growth, a lower labor share, and reduced capital efficiency. The quantitative model outputs are largely consistent with recent trends observed in advanced economies. Keywords: Obsolescence; Productivity Growth; Labor Share (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cam:camjip:2522 Access Statistics for this paper More papers in Janeway Institute Working Papers from Faculty of Economics, University of Cambridge |
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