What does a relative price of investment wedge reveal about the role of investment-specific technology?

A.1 Bayesian estimation data

1. Nominal Gross Domestic Product, BEA, NIPA Table 1.1.5, Line 1, 1948:Q2-2016:Q3, Seasonally Adjusted at Annual Rates

2. Nominal Personal Consumption Expenditure on durables, BEA, NIPA Table 1.1.5, Line 4, 1948:Q2-2016:Q3, Seasonally Adjusted at Annual Rates

3. Nominal Personal Consumption Expenditure on non-durables, BEA, NIPA Table 1.1.5, Line 5, 1948:Q2-2016:Q3, Seasonally Adjusted at Annual Rates

4. Nominal Personal Consumption Expenditure on services, BEA, NIPA Table 1.1.5, Line 6, 1948:Q2-2016:Q3, Seasonally Adjusted at Annual Rates

5. Nominal Gross Private Domestic Investment, BEA, NIPA Table 1.1.5, Line 7, 1948:Q2-2016:Q3, Seasonally Adjusted at Annual Rates

6. Real Personal Consumption Expenditure on durables, BEA, NIPA 1.1.6, Line 4, 1948:Q2-2016:Q3, Chained 2009 Dollars Seasonally Adjusted at Annual Rates

7. Real Personal Consumption Expenditure on non-durables, BEA, NIPA 1.1.6, Line 5, 1948:Q2-2016:Q3, Chained 2009 Dollars Seasonally Adjusted at Annual Rates

8. Real Personal Consumption Expenditure on services, BEA, NIPA Table 1.1.6, Line 6, 1948:Q2-2016:Q3, Chained 2009 Dollars Seasonally Adjusted at Annual Rates

9. Real Gross Private Domestic Investment, BEA, NIPA 1.1.6, Line 7, 1948:Q2-2016:Q3, Chained 2009 Dollars Seasonally Adjusted at Annual Rates

10. Private Non-Farm Hours Worked Major Sector Multisector Productivity Index Base Year 2009 1948:Q2-2013:Q4 BLS PRS85006033 Seasonally Adjusted at Annual Rates

11. Price deflator for personal consumption expenditure on non-durables and services, (3+4)/(7+8)

12. Price deflator for gross private domestic investment and consumer durables, (2+5)/(6+9)

13. Current population survey civilian non-institutional population, 16 years old and over, 1948 through to 2015.

14. Real per capita output Y_t is (1)/ (13)/(11)

15. Real per capita consumption C_t is (3+4)/(13)/(11)

16. Real per capita investment RPItIt is (5+2)/(13)/(11)

17. The relative price of investment (12)/(11)

A.2 The steps involved in estimating Markups μtC and μtI

The methodology used here to estimate the elasticities τ^I and τ^C follows Floetotto, Jaimovich, and Pruitt (2009). To calculate the number of firms operating within each sector, I first calculate the number of firms operating within each of the non-agriculture Standard Industrial Classification (SIC) supersectors. Then I subdivide each sector by its contributions to either consumption or investment production, using data from the input-output use tables available from the Bureau of Economic Analysis (BEA). Lastly, I weigh each sector by their relative contribution to either consumption or investment, then sum across the thirteen SIC supersectors to derive the total number of consumption and investment firms each quarter.

1. The number of firms within each SIC supersector is derived by adding expansions (firms that hired employees), contractions (firms that laid off employees), openings (new start-ups) minus closures (firms that closed).

2. Input-Output Use Table BEA Before Redefinitions 1992–2015. The input-output use tables break down each of the 13 supersectors’s product going toward Personal Consumption Expenditure or Private Fixed Investment. Then each industry is weighed by their relative contribution to the consumption sector (Personal Consumption Expenditure)/(Personal Consumption Expenditure + Fixed Private Investment), and investment sector (Fixed Private Investment)/(Personal Consumption Expenditure+ Fixed Private Investment). Lastly, we sum across supersectors to derive NtC and NtI.

3. Each variable is log differenced, denoted by I^t, C^t, N^tC and N^tI.

4. Then N^tC is regressed on C^t and N^tI on I^t.

5. Using the conditions

   (55)C^t=(τC(μC−1))(1−τC)N^tC

   (56)I^t=(τI(μI−1))(1−τI)N^tI.

   With μI=μC=1.3, values for τ^C and τ^I are calculated.

Then markups μ^tC and μ^tI are calculated by using equations (57) and (58)