Investment-specific productivity and the role of imported equipment in Latin America

Jessica Madariaga, Norman Maynard and Usha Nair-Reichert

Applied Economics Letters, 2020, vol. 27, issue 16, 1347-1351

Abstract: We measure the contribution of imported equipment to labour productivity growth in 12 Latin American countries between 1970 and 2016, accounting for investment-specific technological change embodied in equipment. We link investment-specific technological change with falling relative equipment prices and construct its empirical counterpart by combining observations from each country’s transport, machinery, computers and communication equipment with household consumption data. By excluding structures from our relative equipment price series, we produce more precise growth decompositions, separating investment-specific technological change in equipment from the traditional, Hicks-neutral form of technological progress. Our results show significant variation in the contribution of imported equipment to growth across Latin America. Within country, matched-pair tests indicate that all factors, including imported equipment, make positive and significant contributions to growth. However, cross-country heterogeneity makes identifying significant contributors difficult in a pooled sample.

Date: 2020
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DOI: 10.1080/13504851.2019.1679341

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