Information Technology and the World Economy By Dale W. Jorgenson Harvard University May 17, 2004
Dec 30, 2015
Information Technology and the World Economy
By
Dale W. Jorgenson
Harvard University
May 17, 2004
Economic Growth in the Information Age
INTRODUCTION:
Prices of Information Technology
THE INFORMATION AGE:
Faster, Better, Cheaper!
ROLE OF INFORMATION TECHNOLOGY:
IT Prices and the Cost of Capital
AMERICAN GROWTH RESURGENCE:
IT Investment and Productivity Growth
ECONOMICS ON INTERNET TIME:
The New Research Agenda
THE INFORMATION AGE:Faster, Better, Cheaper!
MOORE'S LAW: The number of transistors on a chip doubles every 18-24 months(Pentium 4, released November 20,2000, has 42 million transistors).
MOORE (1998): "If the automobile industry advanced as rapidly as the semiconductor industry, a Rolls Royce would get half a million miles per gallon, and it would be cheaper to throw it away than to park it."
INVENTION OF THE TRANSISTOR:
Development of Semiconductor Technology.
THE INTEGRATED CIRCUIT:
Memory Chips; Logic Chips.
Transistor Density on Micro Processors and Memory Chips
HOLDING QUALITY CONSTANTMatched Models and Hedonics
SOFTWARE:
Prepackaged, Custom, and Own-Account.
SEMICONDUCTOR PRICE INDEXES:
Memory and Logic Chips.
COMPUTER PRICE INDEXES:
The BEA-IBM Collaboration.
COMMUNICATIONS EQUIPMENT:
Terminal, Switching, and Transmission.
Relative Prices of Computers and Semiconductors, 1959-2002
0.1
1.0
10.0
100.0
1,000.0
10,000.0
100,000.0
1959 1964 1969 1974 1979 1984 1989 1994 1999
Log
Scal
e (1
996=
1)
Computers Memory Logic
All price indexes are divided by the output price index.
95 97 99 02 05 08 11
1994 NTRS
1997 NTRS
1998 / 1999 ITRS
M
inim
um
Fe
atu
re S
ize
(n
m)
(D
RA
M H
alf
Pit
ch
)
500
350
250
180
130
100
70
50
35
25 95 97 99 02 05 08 11
92
92
1992 NTRS
2000 Plan
International SEMATECH
Area for Future Acceleration
Semiconductor Roadmap Acceleration
0
1
10
100
1,000
10,000
1959 1964 1969 1974 1979 1984 1989 1994 1999
Log
Scal
e (1
996=
1)
Computers Central Off ice Sw itching Equipment Prepackaged Softw are
All price indexes are divided by the output price index.Relative Prices of Computers, Communications, and Software, 1959-2002
Relative Prices of Computers, Communications, Software, and Services, 1948-2002
0
1
10
100
1,000
10,000
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998
Log
Sca
le (
1996
=1
)
Computers Communications Software Services
All price indexes are divided by the output price index.
ROLE OF INFORMATION TECHNOLOGY:IT Prices and the Growth of Output.
OUTPUT CONTRIBUTION BY TYPE:
Computers, Communications Equipment, Semiconductors, Software, and IT Services.
OUTPUT SHARES OF IT:
Computers, Communications Equipment, Semiconductors, Software, and IT Services.
OUTPUT CONTRIBUTION OF IT:
IT versus Non-IT Value Added.
Output Shares of Information Technology by Type, 1948-2002
0
1
2
3
4
5
6
7
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998
%
Computers Communications Software Services Total
Output Contribution of Information Technology by Type
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
1948-73 1973-89 1989-95 1995-02
Annu
al C
ontri
butio
n (%
)
Computers Communications Softw are Services
Note: Output contributions are the average annual grow th rates, w eighted by the output shares.
Chart 2.6: Output Contribution of Information Technology
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1948-73 1973-89 1989-95 1995-02
Non-IT Consumption IT Consumption Non-IT Investment IT Investment
Note: Output contributions are the average annual growth rates, weighted by the output shares.
ROLE OF INFORMATION TECHNOLOGY:IT Prices, Investment, and Productivity.
CAPITAL CONTRIBUTION BY TYPE:
Computers, Communications Equipment, and Software.
INPUT SHARES OF IT:
Computers, Communications Equipment, and Software.
CAPITAL CONTRIBUTION:
IT versus Non-IT Capital Services.
Input Shares of Information Technology by Type, 1948-2002
0
1
2
3
4
5
6
1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999
%
Computers Communications Equipment Software Total
Note: Share of current dollar gross domestic income.
Capital Input Contribution of Information Technology by Type
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1948-73 1973-89 1989-95 1995-02
An
nual
Co
ntr
ibu
tion
(%
)
Computers Communications Software
Note: Input contributions are the average annual growth rates, weighted by the income shares.
Capital Input Contribution of Information Technology
0.00
0.50
1.00
1.50
2.00
2.50
1948-73 1973-89 1989-95 1995-02
An
nual
Co
ntr
ibu
tion
(%
)
Non-IT Capital Services IT Capital Services
Note: Input contributions are the average annual growth rates, weighted by the income shares.
Capital Input Contribution by Country
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1980-1989
1989-1995
1995-2001
1981-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
US Canada UK France Germany Italy Japan
Non-IT IT
Capital Input Contribution by Country: Western Europe
-0.500
0.000
0.500
1.000
1.500
2.000
2.50019
89-1
995
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Austria Belgium Denmark Finland Greece Ireland Netherlands Norway Portugal Spain Sweden Switzerland
Non-IT IT
Capital Input Contribution by Country: Eastern Europe
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.019
89-1
995
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Bulgaria Czech Hungary Poland Romania Russia Slovakia Slovenia
Non-IT IT
AMERICAN GROWTH RESURGENCE: IT Investment and Productivity Growth.
AVERAGE LABOR PRODUCTIVITY GROWTH:
Capital Deepening, Labor Quality, TFP.
TOTAL FACTOR PRODUCTIVITY:
IT-Production versus Non-IT Production.
SOURCES OF U.S. ECONOMIC GROWTH:
Capital Input, Labor Input, and TFP.
Contributions of Information Technology to Total Factor Productivity Growth
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1948-73 1973-89 1989-95 1995-02
Annu
al C
ontri
butio
n (%
)
Non-IT Production IT Production
Note: Contributions are average annual relative price changes, w eighted by average nominal output shares.
Sources of Productivity Growth by Country
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
1980-1989
1989-1995
1995-2001
1981-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
US Canada UK France Germany Italy Japan
Non-IT IT
Sources of Gross Domestic Product Growth
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1948-73 1973-89 1989-95 1995-02
Annu
al C
ontri
butio
n (%
)
Labor Input Non-IT Capital Input IT Capital Input Non-IT Production IT Production
Sources of Economic Growth by Country
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
1980-1989
1989-1995
1995-2001
1981-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
US Canada UK France Germany Italy Japan
Labor Non-IT Capital IT Capital Non-IT Productivity IT Productivity
Sources of Economic Growth by Country: Western Europe
-2.00
0.00
2.00
4.00
6.00
8.00
10.0019
89-1
995
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Austria Belgium Denmark Finland Greece Ireland Netherlands Norway Portugal Spain Sweden Switzerland
Labor Non-IT Capital IT Capital TFP
Sources of Economic Growth by Country: Eastern Europe
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.0019
89-1
995
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Bulgaria Czech Hungary Poland Romania Russia Slovakia Slovenia
Labor Non-IT Capital IT Capital TFP
Sources of Average Labor Productivity Growth
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1948-73 1973-89 1989-95 1995-02
Annu
al C
ontri
butio
n (%
)
Labor Quality Non-IT Capital Deepening IT Capital Deepening Non-IT Production IT Production
Sources of Labor Productivity Growth by Country
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
1980-1989
1989-1995
1995-2001
1981-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
1980-1989
1989-1995
1995-2001
US Canada UK France Germany Italy Japan
Labor Quality Non IT Capital Deepening IT Capital Deepening Non-IT Productivity IT Productivity
Sources of Labor Productivity Growth by Country: Western Europe
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.0019
89-1
995
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Austria Belgium Denmark Finland Greece Ireland Netherlands Norway Portugal Spain Sweden Switzerland
Labor Quality Non-IT Capital Deepening IT Capital Deepening TFP
Sources of Labor Productivity Growth by Country: Eastern Europe
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.0019
89-1
995
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Bulgaria Czech Hungary Poland Romania Russia Slovakia Slovenia
Labor Quality Non-IT Capital Deepening IT Capital Deepening TFP
ECONOMICS ON INTERNET TIME: The New Research Agenda.
• Modeling IT and the semiconductor industry: permanent versus transitory contributions to economic growth.
•The Solow Paradox -- we see computers everywhere but in the productivity statistics -- versus the Information Age.
•Equity Valuations and Growth Prospects: accumulation of intangible assets versus irrational exuberance.
•Widening Wage Inequality:capital-skill complementarity versus skill-biased technical change.