Characterizing technical progress

Is there an aggregate technical shock? Is the growth rate of TFP a positive constant buffeted by random shocks? We use data on the Spanish economy, disaggregated by sector and region, from two different data sets to investigate the nature of technical change. Our results show that technical change is sector-specific, and operates at the national level. We also find that TFP growth rates are far from being constant. Thus, our findings contradict the basic assumption underlying the model of "Kapital, Labour and exogenous Aggregate TFP". We discuss the role of embodied technical change as a source of observed TFP growth. We also find no role for "broad externalities" as a determinant of TFP growth