Factor Markets, Biased Technological Change and Total Factor Productivity - Empirical Evidence from a Sample of OECD Countries

Abstract

Technological change is far from neutral. The empirical analysis of the rate and direction of technological change in a significant sample of 10 OECD countries in the years 1971-2001 confirms the strong bias of new technologies. The introduction of new and biased technologies affects the actual levels of total factor productivity when it matches the characteristics of local factor markets so that locally abundant inputs become more productive. In turn the matching between the bias of technological change and the relative abundance of production factors can be considered as the result of a path dependent process where the quality of the local knowledge infrastructure plays a central role in shaping the direction.