IT and Beyond: The Contribution of Heterogeneous Capital to Productivity

This article explores the relationship between capital composition and productivity using a unique, detailed dataset on firm investment in the United States in the late 1990s. I develop a methodology for estimating the separate effects of multiple capital types in a production function framework. I back out the implied marginal products of each capital type and compare these with rental price data. I find that although most capital types earned normal returns, information and communications technology capital goods had marginal products substantially above their rental prices. The article also provides evidence of complementarities and substitutabilities among capital types and between capital types and labor.