Japan’s Potential Growth in a World Perspective
by
Dale W. Jorgenson
Harvard University
http://post.economics.harvard.edu/faculty/jorgenson/
Presented at the RIETI Policy Symposium
Determinants of Total Factor Productivity and Japan's Potential Growth:
An International Perspective
Tokyo, Japan
July 25, 2006
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
WORLD GROWTH RESURGENCE:
IT Investment and Productivity Growth
ECONOMICS ON INTERNET TIME:
The New Research Agenda
1
THE INFORMATION AGE:
Faster, Better, Cheaper!
MOORE'S LAW: The number of transistors on a chip doubles
every 12-24 months. (Itanium 2 Processor, released
November 8, 2004, has 592 million transistors.)
INVENTION OF THE TRANSISTOR:
Development of Semiconductor Technology.
THE INTEGRATED CIRCUIT:
Memory Chips; Logic Chips.
SIA Annual Report 2005: In 1978, a commercial flight between
New York and Paris cost $900 and took seven hours. If the
principles of Moore's Law were applied to the airline industry, that
flight would now cost about a penny and take less than one second.
2
3
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
SEMICONDUCTOR PRICE INDEXES:
Memory and Logic Chips.
COMPUTER PRICE INDEXES:
The BEA-IBM Collaboration.
COMMUNICATIONS EQUIPMENT:
Terminal, Switching, and Transmission.
SOFTWARE:
Prepackaged, Custom, and Own-Account.
4
Relative Prices of Computers and Semiconductors, 1959-2004
All price indexes are divided by the output price index
100,000.0
10,000.0
Log Scale (2000=1)
1,000.0
100.0
10.0
1.0
0.1
0.0
1959
1964
1969
1974
Computers
1979
1984
Memory
1989
Logic
1994
1999
2004
5
92
500
95
97
02
05
08
11
1992 NTRS
350
Minimum Feature Size (nm)
Pitch)
(DRAM Half
99
1994 NTRS
250
1997 NTRS
180
1998 / 1999 ITRS
130
100
2001/
2003
ITRS*
International SEMATECH
70
50
Area for Future ITRS
Acceleration
Acceleration
35
25
92
95
97
99
02
05
08
11
*Note the 2003 ITRS timing is unchanged from the 2001 ITRS
Semiconductor Roadmap Acceleration
6
ROLE OF INFORMATION TECHNOLOGY:
IT Prices, Investment, and Productivity.
INPUT SHARES OF IT:
Computers, Communications Equipment, and Software.
CAPITAL CONTRIBUTION:
IT versus Non-IT Capital Services.
CAPITAL CONTRIBUTION BY TYPE:
Computers, Communications Equipment, and Software.
7
Input Shares of Information Technology by Type, 1948-2004
6
5
%
4
3
2
1
0
1949
1954
1959
Computers
1964
1969
1974
1979
Communications Equipment
1984
1989
Software
1994
1999
8
Total
2004
Capital Input Contribution of Information Technology by Type
Input contributions are the average annual growth rates, weighted by the income shares.
0.90
0.80
0.70
Annual Contribution (%)
0.60
0.50
0.40
0.30
0.20
0.10
0.00
1948-73
1973-89
Computers
1989-95
Communications
Software
1995-04
9
Capital Input Contribution of Information Technology
Input contributions are the average annual growth rates, weighted by the income shares.
2.50
Annual Contribution (%)
2.00
1.50
1.00
0.50
0.00
1948-73
1973-89
Non-IT Capital Services
1989-95
IT Capital Services
1995-04
10
US
Canada
UK
Non-IT Capital
France
Germany
Italy
IT Capital
11
Japan
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1981-1989
2000-2004
1995-2000
1989-1995
1980-1989
Annual Contribution (%)
Capital Input Contribution: G7
3.00
2.50
2.00
1.50
1.00
0.50
0.00
-0.50
World
G7
Developing Asia
Non-G7
Non-IT Capital
Latin America
Eastern Europe
Sub-Saharan
Africa
IT Capital
12
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
Annual Contribution (%)
Capital Input Contribution: World and Regions
2.50
2.00
1.50
1.00
0.50
0.00
-0.50
-1.00
-1.50
N. Africa &
M. East
Brazil
China
India
Non-IT Capital
Indonesia
IT Capital
Mexico
Russia
13
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
Annual Contribution (%)
Capital Input Contribution: Developing and Transition Economies
4.00
3.00
2.00
1.00
0.00
-1.00
-2.00
S. Korea
WORLD GROWTH RESURGENCE:
IT Investment and Productivity Growth.
TOTAL FACTOR PRODUCTIVITY:
IT-Production versus Non-IT Production.
SOURCES OF ECONOMIC GROWTH:
Capital Input, Labor Input, and TFP.
LABOR INPUT GROWTH:
Hours Worked and Labor Quality.
14
Contributions of Information Technology to Total Factor Productivity Growth
Contributions are average annual relative price changes, weighted by average nominal output shares.
1.20
Annual Contribution (%)
1.00
0.80
0.60
0.40
0.20
0.00
1948-73
1973-89
Non-IT Production
1989-95
IT Production
1995-04
15
Sources of Gross Domestic Product Growth
4.5
4.0
Annual Contribution (%)
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1948-73
Labor Input
1973-89
Non-IT Capital Input
1989-95
IT Capital Input
Non-IT Production
1995-04
IT Production
16
US
Labor Input
Canada
UK
Non-IT Capital Input
France
Germany
IT Capital Input
Italy
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1980-1989
2000-2004
1995-2000
1989-1995
1981-1989
2000-2004
1995-2000
1989-1995
1980-1989
Annual Contribution (%)
Sources of Gross Domestic Product Growth
5.00
4.00
3.00
2.00
1.00
0.00
-1.00
Japan
TFP
17
World
G7
Developing Asia
Labor
Non-G7
Non-IT Capital
Latin America
IT Capital
Eastern Europe
Sub-Saharan
Africa
TFP
18
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
Annual Contribution (%)
Sources of Growth by Country: World and Regions
10.00
8.00
6.00
4.00
2.00
0.00
-2.00
-4.00
-6.00
-8.00
-10.00
N. Africa &
M. East
Brazil
China
Labor
India
Non-IT Capital
Indonesia
IT Capital
Mexico
Russia
TFP
19
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
2000-2004
1995-2000
1989-1995
Annual Contribution (%)
Sources of Economic Growth: Developing and Transition Economies
10.0
5.0
0.0
-5.0
-10.0
S. Korea
ECONOMICS ON INTERNET TIME:
The New Research Agenda.
•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.
• Modeling IT and the semiconductor industry: permanent
versus transitory contributions to economic growth.
20