information technology and the world economy by dale w. jorgenson harvard university march 5, 2005
TRANSCRIPT
Information Technology and the World Economy
By
Dale W. Jorgenson
Harvard University
http://post.economics.harvard.edu/faculty/jorgenson/
March 5, 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 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, 1959-2002All 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
Log
Scal
e (1
996=
1)
All price indexes are divided by the output price index.
95 97 99 02 05 08 11
1994 NTRS
1997 NTRS
1998 / 1999 ITRS
Min
imu
m F
ea
ture
Siz
e (
nm
)(D
RA
M H
alf
Pit
ch
)500
350
250
180
130
100
70
50
35
2595 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
lfP
itc
h)
500
350
250
180
130
100
70
50
35
2595 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, 1959-2002All 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
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
Computers Communications Software
Relative Prices of Computers, Communications and Software, 1948-2002All 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
Log
Sca
le (
1996
=1
)
Computers Communications Software
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, 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, 1948-2002Output Shares of Information Technology by Type, 1948-2002
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
%
Computers Communications Software Total
Share of current dollar gross domestic product.
Output Contribution of Information Technology by TypeOutput 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 1995-02
Annu
al C
ontri
butio
n (%
)
Computers Communications Software
Output contributions are the average annual growth rates, weighted by the output shares.
Non-IT Consumption Non-IT Investment IT Output
Output Contribution of Information TechnologyOutput 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 1995-02Non-IT Consumption Non-IT Investment IT Output
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, 1948-2002Input 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
Year
%
Computers Communications Equipment Software Total
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 1995-02
Ann
ual C
ont
ribu
tio
n (%
)
Computers Communications Software
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 1995-02
An
nu
al C
on
trib
uti
on
(%
)
Input contributions are the average annual growth rates, weighted by the income shares.
Capital Input Contribution by Country
Non-IT IT
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
Capital Input Contribution by Country: Non-G7 Industrialized
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
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Australia Austria Belgium Denmark Finland Greece Ireland Israel Netherlands NewZealand
Norway Portugal Spain Sweden Switz.
Capital Input Contribution by Country: Non-G7 Industrialized
Non-IT IT
Capital Input Contribution by Country: Developing Asia
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.5019
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
China Hongkong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand Vietnam
Capital Input Contribution by Country: Developing Asia
Non-IT IT
Capital Input Contribution by Country: Latin America
0.00
0.50
1.00
1.50
2.00
2.50
3.00
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
Argentina Brazil Chile Colombia Mexico Venezuela
Capital Input Contribution by Country: Latin America
Non-IT IT
Capital Input Contribution by Country: Eastern Europe and Other
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.5019
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
Bulgaria Czech Hungary Poland Romania Russia Slovakia Slovenia Egypt South Africa Turkey
Capital Input Contribution by Country: Eastern Europe and Other
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 GrowthContributions 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 1995-02
Annu
al C
ontri
butio
n (%
)
Non-IT Production IT Production
Contributions are average annual relative price changes, weighted by average nominal output shares.1.20
Sources of Total Factor Productivity Growth by Country
Non-IT IT
-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
Sources of Gross Domestic Product Growth
Labor Input Non-IT Capital Input IT Capital Input Non-IT Production IT Production
-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
Sources of Economic Growth by Country: Non-G7 Industrialized
-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
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Australia Austria Belgium Denmark Finland Greece Ireland Israel Netherlands NewZealand
Norway Portugal Spain Sweden Switz.
Labor Non-IT Capital IT Capital TFP
Sources of Economic Growth by Country: Developing Asia
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
12.0019
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
China Hongkong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand Vietnam
Labor Non-IT Capital IT Capital TFP
Sources of Economic Growth by Country: Latin America
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
Argentina Brazil Chile Colombia Mexico Venezuela
Labor Non-IT Capital IT Capital TFP
Sources of Economic Growth by Country: Eastern Europe and Other
-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
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 Egypt South Africa Turkey
Labor Non-IT Capital IT Capital TFP
Sources of Average Labor Productivity Growth
Labor Quality Non-IT Capital Deepening IT Capital Deepening Non-IT TFP IT TFP
1948-73 1973-89 1989-95 1995-02
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 (%
)
Sources of Labor Productivity Growth by Country
Labor Quality Non-IT Capital Deepening IT Capital Deepening Non-IT TFP IT TFP
-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
Ann
ual C
ontr
ibut
ion
(%)
Sources of Labor Productivity Growth by Country: Non-G7 Industrialized
-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
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Australia Austria Belgium Denmark Finland Greece Ireland Israel Netherlands NewZealand
Norway Portugal Spain Sweden Switz.
Labor Quality Non-IT Capital Deepening IT Capital Deepening TFP
Sources of Labor Productivity Growth by Country: Developing Asia
-4.00
-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
China Hongkong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand Vietnam
Labor Quality Non-IT Capital Deepening IT Capital Deepening TFP
Sources of Labor Productivity Growth by Country: Latin America
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
Argentina Brazil Chile Colombia Mexico Venezuela
Labor Quality Non-IT Capital Deepening IT Capital Deepening TFP
Sources of Labor Productivity Growth by Country: Eastern Europe and Other
-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
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 Egypt South Africa Turkey
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.