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 (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.
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).
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.
Relative Prices of Computers and Semiconductors, 1959-2003
All price indexes are divided by the output price index
100,000.0
Log Scale (1996=1)
10,000.0
1,000.0
100.0
10.0
1.0
0.1
1959
1964
1969
1974
Computers
1979
1984
Memory
1989
Logic
1994
1999
92
500
95
97
02
05
08
11
1992 NTRS
350
Minimum Feature Size (nm)
(DRAM Half
Pitch)
99
1994 NTRS
250
1997 NTRS
180
1998 / 1999 ITRS
130
100
2001/
2003
ITRS*
International SEMATECH
70
50
Area for Future Acceleration
ITRS Acceleration
35
25
92
95
97
99
02
05
08
*Note the 2003 ITRS timing is unchanged from the 2001 ITRS
Semiconductor Roadmap Acceleration
11
Relative Prices of Computers, Communications and Software, 1959-2003
All price indexes are divided by the output price index
10,000
Log Scale (1996=1)
1,000
100
10
1
0
1959
1964
Computers
1969
1974
1979
1984
Central Office Switching Equipment
1989
1994
1999
Prepackaged Software
Relative Prices of Computers, Communications and Software, 1948-2003
All price indexes are divided by the output price index
10,000
Log Scale (1996=1)
1,000
100
10
1
0
1948
1953
1958
1963
Computers
1968
1973
1978
Communications
1983
1988
Software
1993
1998
2003
ROLE OF INFORMATION TECHNOLOGY:
IT Prices and the Growth of Output.
OUTPUT SHARES OF IT:
Computers, Communications Equipment, and Software.
OUTPUT CONTRIBUTION OF IT:
IT versus Non-IT Value Added.
OUTPUT CONTRIBUTION BY TYPE:
Computers, Communications Equipment, and Software.
Output Shares of Information Technology by Type, 1948-2003
Share of current dollar gross domestic product.
5.0
4.5
4.0
3.5
%
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1948
1953
1958
Computers
1963
1968
1973
Communications
1978
1983
Software
1988
Total
1993
1998
2003
Output Contribution of Information Technology by Type
Output contributions are the average annual growth rates, weighted by the output shares.
1.00
0.90
Annual Contribution (%)
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
1948-73
1973-89
Computers
1989-95
Communications
Software
1995-03
Output Contribution of Information Technology
Output contributions are the average annual growth rates, weighted by the output shares.
4.5
4.0
Annual Contribution (%)
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1948-73
1973-89
Non-IT Consumption
1989-95
Non-IT Investment
1995-03
IT Output
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.
Input Shares of Information Technology by Type, 1948-2003
Share of current dollar gross domestic income.
6
5
%
4
3
2
1
0
1949
1954
1959
Computers
1964
1969
1974
1979
Communications Equipment
1984
1989
Software
1994
1999
Total
Capital Input Contribution of Information Technology by Type
Input contributions are the average annual growth rates, weighted by the income shares.
1.00
0.90
Annual Contribution (%)
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
1948-73
1973-89
Computers
1989-95
Communications
Software
1995-03
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
1995-03
Capital Input Contribution by Country
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1980- 1989- 19951989 1995 2001
US
1981- 1989- 19951989 1995 2001
Canada
1980- 1989- 19951989 1995 2001
UK
1980- 1989- 19951989 1995 2001
France
Non-IT
1980- 1989- 19951989 1995 2001
Germany
IT
1980- 1989- 19951989 1995 2001
Italy
1980- 1989- 19951989 1995 2001
Japan
AMERICAN GROWTH RESURGENCE:
IT Investment and Productivity Growth.
TOTAL FACTOR PRODUCTIVITY:
IT-Production versus Non-IT Production.
SOURCES OF U.S. ECONOMIC GROWTH:
Capital Input, Labor Input, and TFP.
AVERAGE LABOR PRODUCTIVITY GROWTH:
Capital Deepening, Labor Quality, TFP.
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
1995-03
Sources of TFP Growth by Country
1.50
1.00
0.50
0.00
-0.50
-1.00
-1.50
1980- 1989- 19951989 1995 2001
US
1981- 1989- 19951989 1995 2001
Canada
1980- 1989- 19951989 1995 2001
UK
1980- 1989- 19951989 1995 2001
France
Non-IT
1980- 1989- 19951989 1995 2001
Germany
IT
1980- 1989- 19951989 1995 2001
Italy
1980- 1989- 19951989 1995 2001
Japan
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
1995-03
IT Production
Sources of Economic Growth by Country
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
1980- 1989- 19951989 1995 2001
US
Labor
1981- 1989- 19951989 1995 2001
Canada
Non-IT Capital
1980- 1989- 19951989 1995 2001
UK
IT Capital
1980- 1989- 19951989 1995 2001
France
1980- 1989- 19951989 1995 2001
Germany
Non-IT Total Factor Productivity
1980- 1989- 19951989 1995 2001
Italy
1980- 1989- 19951989 1995 2001
Japan
IT Total Factor Productivity
Sources of Average Labor Productivity Growth
3.50
Annual Contribution (%)
3.00
2.50
2.00
1.50
1.00
0.50
0.00
1948-73
Labor Quality
1973-89
Non-IT Capital Deepening
1989-95
IT Capital Deepening
Non-IT TFP
1995-03
IT TFP
Sources of Labor Productivity Growth by Country
3.50
Annual Contribution (%)
3.00
2.50
2.00
1.50
1.00
0.50
0.00
-0.50
-1.00
-1.50
1980-1989-19951989 1995 2001
US
Labor Quality
1981-1989-19951989 1995 2001
Canada
Non IT Capital Deepening
1980-1989-19951989 1995 2001
1980-1989-19951989 1995 2001
UK
IT Capital Deepening
France
1980-1989-19951989 1995 2001
1980-1989-19951989 1995 2001
Germany
Non-IT Total Factor Productivity
Italy
1980-1989-19951989 1995 2001
Japan
IT Total Factor Productivity
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.