The quantitative role of capital-goods imports in U.S. growth

A significant body of literature has found that technological improvements embodied in new capital goods account for a large share of U.S. output growth. This phenomenon, known as investment-specific technological change, has stimulated the growth rate of output by raising the efficiency of equipment and software (E&S) in the production of final output. In an influential contribution, Jeremy Greenwood, Zvi Hercowitz, and Per Krusell (1997) found that investment-specific technological change accounted for nearly 60 percent of growth in U.S. output per hour during the postwar period. A notable fact is that an increasing share of U.S. aggregate E&S investment expenditure has been allocated to capital-goods imports. While capital-goods imports were only 3.5 percent of E&S investment in 1967, by 2008 their share had risen tenfold to 36 percent. The goal of this paper is to measure the contribution of capital-goods imports to growth in U.S. output per hour using a simple growth accounting exercise. We find that capitalgoods imports have contributed 20 to 30 percent to growth in U.S. output per hour between 1967 and 2008. We also find that, overall, the average contribution of the stock of E&S to growth in U.S. output per hour has been about 70 percent. This implies that capital-goods