Post on 12-Jul-2020
Information Technology and the World Economy
By
Dale W. Jorgenson
Harvard University
http://post.economics.harvard.edu/faculty/jorgenson/
June 7, 2005
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.
Source: No Exponential is Forever, Gordon Moore ftp://download.intel.com/research/silicon/Gordon_Moore_ISSCC_021003.pdf
HOLDING QUALITY CONSTANT
Matched 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, 1959-2003 All price indexes are divided by the output price index
Computers Memory Logic
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
Lo
g S
cale
(19
96
=1)
95 97 99 02 05 08 11
1994 NTRS
1997 NTRS
1998 / 1999 ITRS
Min
imu
m F
ea
ture
Siz
e (
nm
)
(DR
AM
Ha
lf
Pit
ch
)
500
350
250
180
130
100
70
50
35
25
95 97 99 02 05 08 11
92
92
1992 NTRS
International SEMATECH
Area for Future ITRS Acceleration
Semiconductor Roadmap Acceleration
95 97 99 02 05 08 11
1994 NTRS
1997 NTRS
1998 / 1999 ITRS
(DR
AM
Ha
lf
Pit
ch
)
500
350
250
180
130
100
70
50
35
25
95 97 99 02 05 08 11
92
92
1992 NTRS
International SEMATECH
Area for Future Acceleration
2001/
2003
ITRS*
*Note the 2003 ITRS timing is unchanged from the 2001 ITRS
Relative Prices of Computers, Communications and Software, 1959-2003 All price indexes are divided by the output price index
Computers Central Office Switching Equipment Prepackaged Software
0
1
10
100
1,000
10,000
1959 1964 1969 1974 1979 1984 1989 1994 1999
Lo
g S
ca
le (
19
96
=1
)
Computers Communications Software
Relative Prices of Computers, Communications and Software, 1948-2003 All price indexes are divided by the output price index
0
1
10
100
1,000
10,000
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003
Log S
cale
(1996=
1)
ROLE OF INFORMATION TECHNOLOGY:
IT Prices and the Growth of Output.
OUTPUT CONTRIBUTION BY TYPE:
Computers, Communications Equipment, and Software.
OUTPUT SHARES OF IT:
Computers, Communications Equipment, and Software.
OUTPUT CONTRIBUTION OF IT:
IT versus Non-IT Value Added.
Computers Communications Software Total
Output Shares of Information Technology by Type, 1948-2003
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003
%
Share of current dollar gross domestic product.
Output Contribution of Information Technology by Type Output contributions are the average annual growth rates, weighted by the output shares.
Computers Communications Software
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 1995-03
An
nu
al
Co
ntr
ibu
tio
n (
%)
Non-IT Consumption Non-IT Investment IT Output
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 1995-03
An
nu
al C
on
trib
utio
n (
%)
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.
Computers Communications Equipment Software Total
Input Shares of Information Technology by Type, 1948-2003
0
1
2
3
4
5
6
1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999
%
Share of current dollar gross domestic income.
Capital Input Contribution of Information Technology by Type
Computers Communications Software
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 1995-03
An
nu
al
Co
ntr
ibu
tio
n (
%)
Input contributions are the average annual growth rates, weighted by the income shares.
Non-IT Capital Services IT Capital Services
Capital Input Contribution of Information Technology
0.00
0.50
1.00
1.50
2.00
2.50
1948-73 1973-89 1989-95 1995-03
An
nu
al
Co
ntr
ibu
tio
n (
%)
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
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
Contributions are average annual relative price changes, weighted by average nominal output shares.
Non-IT Production IT Production
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1948-73 1973-89 1989-95 1995-03
An
nu
al
Co
ntr
ibu
tio
n (
%)
Sources of TFP 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
Labor Input Non-IT Capital Input IT Capital Input Non-IT Production IT Production
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 1995-03
An
nu
al
Co
ntr
ibu
tio
n (
%)
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 Total Factor Productivity IT Total Factor Productivity
Sources of Average Labor Productivity Growth
Labor Quality Non-IT Capital Deepening IT Capital Deepening Non-IT TFP IT TFP
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1948-73 1973-89 1989-95 1995-03
An
nu
al
Co
ntr
ibu
tio
n (
%)
Sources of Labor Productivity Growth by Country
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
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
An
nu
al
Co
ntr
ibu
tio
n (
%)
Labor Quality Non IT Capital Deepening IT Capital Deepening Non-IT Total Factor Productivity IT Total Factor Productivity
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.