## Measuring Technological Change of Heterogeneous ProductsTechnological-change measures of heterogeneous products must account for their diverse characteristics. The central task of this report is to develop and apply such measures. The following definition focuses on the heterogeneous nature of products: Technological change of a product, whose characteristics and prices change over time, is the change in total factor inputs required to produce the product, holding characteristics (output) constant. The authors develop a theory of technological design and production to provide an explicit framework in which to place empirical measures of technological change, hedonic price indexes, and cost-estimating relationships. Technological change equations were estimated for milling machines, turbine-powered airliners, and turbine engines. Based on the empirical findings, the authors conclude that, because of omitted variables, the use of product characteristics as a shortcut to measures of value and performance is an uncertain undertaking and cannot be counted on to produce adequate measures of productivity, hedonic prices, or technological change. |

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### Contents

A Cost Reduction | 3 |

THEORY OF TECHNOLOGICAL CHANGE | 7 |

Example of a Turbine Engine Tradeoff Surface in Cost | 14 |

Copyright | |

4 other sections not shown

### Common terms and phrases

aircraft certification date Aircraft Turbine Engines airframe cost airframe weight analysis ATBO automobiles calculated Chow coefficients computers cost and weight cost-estimating relationships declining defined dimensionality dummy variables empirical empty weight EQUATIONS OF LOGARITHM example factor inputs fuel cost hedonic price indexes heterogeneous products holding performance constant horsepower increased Independent Variable input cost index input prices jet engine Knight labor lift-to-drag ratio Lockheed Corporation LOGARITHM OF DEFLATED machine tools measure technological change measures of technological milling machines nominal cost operating costs payload percent performance characteristics pressure ratio price equations Producer Price Index product characteristics productivity change Rand Corporation seat-mile costs shown in Table significant specific fuel consumption speed technical characteristics technical constraints technological change technological-change measures thermodynamic total factor productivity tradeoff function tradeoff surface transformation turbine inlet temperature user outputs user's Variable Equation R2 vector workpiece