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Information Technology and the American Productivity Resurgence

This paper examines the role of information technology (IT) in driving productivity growth and economic resurgence. It discusses the impact of IT prices, investment, and productivity, as well as the contributions of IT capital services to overall economic growth. The paper also explores the potential for further growth and the new research agenda in IT production and utilization.

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Information Technology and the American Productivity Resurgence

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  1. Information Technology and the American Productivity Resurgence By Dale W. Jorgenson Harvard University May 13, 2008 http://www.economics.harvard.edu/faculty/jorgenson The 2008 World Congress on National Accounts and Economic Performance Measures for Nations Washington, D.C. ~ May 12-17, 2008

  2. Economic Growth in the Information Age INTRODUCTION: Prices of Information Technology 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

  3. THE INFORMATION AGE:Faster, Better, Cheaper! MOORE'S LAW:The number of transistors on a chip doubles every 24 months. (The Tukwila Processor to be released later in 2008 will have more than two billion 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.

  4. Source: No Exponential is Forever, Gordon Moore ftp://download.intel.com/research/silicon/Gordon_Moore_ISSCC_021003.pdf

  5. HOLDING QUALITY CONSTANTMatched 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.

  6. Relative Prices of Computers and Semiconductors, 1959-2004 All price indexes are divided by the output price index Computers Memory Logic

  7. ROLE OF INFORMATION TECHNOLOGY:IT Prices, Investment, and Productivity. INPUT SHARES OF IT: Computers, Communications Equipment, and Software. CAPITAL CONTRIBUTION: IT vs. Non-IT Capital Services. CAPITAL CONTRIBUTION BY TYPE: Computers, Communications Equipment, and Software.

  8. 2.50 2.00 1.50 1.00 0.50 0.00 1960-1995 1995-2000 2000-2005 U.S. Capital Input Contribution of Information Technology Annual percentage growth rates, weighted by income shares Annual Contribution (%) Non-IT Capital Services IT Capital Services

  9. World Capital Input Contribution of Information Technology Annual percentage growth rates, weighted by income shares Annual Contribution (%)

  10. G7 Capital Input Contribution of Information Technology Annual percentage growth rates, weighted by income shares Annual Contribution (%)

  11. Developing and Transition Economy Contribution of Information Technology Annual percentage growth rates, weighted by income shares Annual Contribution (%)

  12. 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.

  13. Sources of U.S. Economic Growth 4.50 4.00 3.50 3.00 2.50 Annual Contribution (%) 2.00 1.50 1.00 0.50 0.00 -0.50 1960-1995 1995-2000 2000-2005 Non-college Labor College Labor Non-IT Capital IT Capital Aggregate TFP Annual percentage growth rates

  14. U.S. Industry Contributions to Productivity Growth Annual percentage growth rates with Domar weights 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 -0.20 1960-1995 1995-2000 2000-2005 Non-IT Industries IT-Using Industries IT-Producing Industries

  15. Change in Contribution to Productivity: 2000-2005 Less 1960-1995, IT Users Telephone and telegraph Business svc exc computer Insurance carriers, ins agents, services Air transport. Social svc and membership org Misc professional services Wholesale trade Radio and TV Machinery excl computers Medical equipment and opthalmic goods Measuring instruments Aerospace Publishing Gas utilities Audio and video equip Legal services Ships and boats Educational services (private) Other Electrical machinery Transportation svcs & Pipelines Other Transportation equipment Printing and reproduction Other Instruments Misc repair Insulated wire Research Motion pictures Nondeposit; Sec-com brokers;Inves -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2 Annual percentage growth rates with Domar weights

  16. Sources of World Economic Growth Annual percentage growth rates Annual Contribution (%)

  17. Sources of G7 Economic Growth Annual percentage growth rates Annual Contribution (%)

  18. Sources of Growth for Developing and Transition Economies Annual percentage growth rates Annual Contribution (%)

  19. EU KLEMS PROJECT INTERMEDIATE RELEASE: November 6, 2007 25 EU ECONOMIES: U.S., Australia, Canada, Japan, and Korea SOURCES OF DATA: Labor, Capital, and Intermediate Inputs COMPLETION DATE: June 30, 2008

  20. THE NEW AGENDA: IT PRODUCTION: Permanent vs. Transitory Changes IT UTILIZATION: Trade and Services to the Fore WORLD GROWTH OUTLOOK: Potential for Growth Unchanged THE U.S. AND THE WORLD ECONOMY: Where Do We Stand?

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