Abstract
This paper examines the impact of equipment quality on output growth and composition of non-production worker and production worker in the U.S. manufacturing industries from 1974 - 1994. We Show that, by using panel data estimation 457 4-digit industries in NBER-CES Manufacturing Industry Database, improvement in equipment quality increases the output growth. More specifically, the effect of equipment quality is more significant in the period from 1984 to 1994 and in the durable good sector. The paper further reveals that capital-skill complemetarity becomes more important for determining the labor composition over time. Moreover, technology adoption is only found in the period 1974 - 1983 while quality-skill substitutability is solely revealed in the period 1984 - 1994.