Sources of growth, input structure and technical progress in American high-technology: a business cycle analysis

Abstract

General public concern about the strength of American manufacturing has lead to a consensus on the importance of the role of high-technology. With a time series data set on inputs and output of the high-technology sector for the period 1967-1982, this paper identifies the special features of this sector in terms of: (1) the sources of its output growth; (2) the substitution possibilities among its resource inputs; and (3) the nature and bias of its technical change. Output growth and its decomposed sources were studied by exploiting a conventional growth equation. The decomposition of the growth equation indicated that real growth in high-technology production took place during the business cycle 1973-1979 and that material and capital explained most of the output growth for the overall study period; the contributions of labor and total factor productivity were negligible. Substitution possibilities and technical change bias were studied by estimating a dual translog cost function that models high-technology production. The cost function was modeled with stocks of R&D as an index of technical change and included four inputs of capital, production workers, nonproduction workers and materials respectively.<>