Ulrich Doraszelski (Wharton)

“Measuring the Bias of Technological Change”

Abstract

When technological change occurs, it can increase the productivity of capital, labor,and the other factors of production in equal terms or it can be biased towards a specificfactor. Whether technological change favors some factors of production over othersis an empirical question that is central to economics. The literatures in industrialorganization, productivity, and economic growth rest on very specific assumptions aboutthe bias of technological change. Yet, the evidence is sparse. In this paper we propose a general framework for estimating production functionsthat allows productivity to be multi-dimensional. Using firm-level panel data, we areable to directly assess the bias of technological change by measuring, at the level of theindividual firm, how much of technological change is factor neutral and how much ofit is labor augmenting. We further relate the speed and the direction of technologicalchange to firms’ R&D activities.