%0 Report
        %A Choi, Dongkeun
%A Lee, Munseob
        %T Equipment, Structures, and the Limits of Investment-Specific Technological Change
        %D 2026
        %8 2026 May
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 18671
        %U https://www.iza.org/publications/dp18671
        %X The falling relative price of equipment, long viewed as the signature of investment-specific technological change (ISTC), has a countervailing force: rising structures prices. We establish four facts: high-income countries' structures prices rise as equipment prices fall; each investment rate falls with its own price; equipment prices predict income growth more strongly than structures prices; and U.S. structures price rises are broad-based. KLEMS data attribute roughly half the post-1996 rise in construction prices, in the U.S. and abroad, to declining construction TFP. We build a two-capital endogenous growth model with structures in production and R&D. Calibrated to the U.S., structures impose a structural drag of 0.50 percentage points per year, partially offsetting a 1.32 percentage point equipment boost. A nested CES extension finds structures-unskilled substitutability alongside equipment-skilled complementarity. These margins shrink the drag by 20-30% and reveal a novel channel whose omission overstates the 1963-2019 U.S. skill premium rise by 30%.
        %K equipment
%K structures
%K investment-specific technological change
%K endogenous growth