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

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.

KEYWORDS:

• Equipment
• growth
• Latin America

JEL CLASSIFICATION:

• F40
• O54
• O49
• F63

Disclosure statement

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

¹ Following Zelenyuk’s (2014) methodology, the use of pooled tests allows for comparisons to regression t-tests. Pooled tests also highlight the importance of cross-country heterogeneity and the benefits of our subsequent matched-pair tests.