Embodied Technological Change,Learning‐by‐doing and the Productivity Slowdown*

The productivity slowdown in the US economy since the first oil shock has recently been associated with a larger decline rate of the relative price of equipment investment and a smaller rate of disembodied technical change. We set up a growth model in which learning‐by‐doing is the engine of both embodied and disembodied technological progress. A shift in the relative efficiency of learning‐by‐doing from the consumption to the investment sector is shown to imply a technological reassignment consistent with the above‐mentioned evidence. This result derives from the interaction between the obsolescence costs inherent in embodiment and the learning‐by‐doing engine.