Vintage technology, technical change and skill constraints : evidence from US exports of new and used machines

When countries import production machinery, they must choose between new and used equipment. This article looks at that choice in the presence of labor-saving technical progress and complementarity between technologies and skills within the firm. It develops a theoretical model of the market for used machines. It then analyzes data on U.S. exports of metalworking machine tools by country of destination, classifying machines according to their vintage and their technological characteristics. The data show that the share of used equipment imported is higher if the importing country has a lower level of development, as measured by income per capita. Econometric estimation of the determinants of this share shows that it also is higher the greater is the technological change embodied in the machine or the greater is the change in the skills required to run the machine efficiently. These results indicate that technological factors and skill constraints may be as important as factor prices in determining the choice of technique in developing countries. The policy recommendation emerging from this work—avoid constraints on imports of used equipment—is similar to that in the existing literature. But the reasoning is different. Instead of emphasizing inappropriate capital-labor ratios for low-wage countries, the results indicate that investment in advanced technologies is effective only if importing countries have the skills to use them