information technology and the world economy by dale w. jorgenson harvard university june 10, 2005
TRANSCRIPT
Information Technology and the World Economy
By
Dale W. Jorgenson
Harvard University
http://post.economics.harvard.edu/faculty/jorgenson/
June 10, 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
WORLD 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 12-24 months. (Itanium 2 Processor, released November 8, 2004, has 592 million transistors.)
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.
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, 1959-2003All 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)
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, 1959-2003All 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
cale
(19
96=1
)
Computers Communications Software
Relative Prices of Computers, Communications and Software, 1948-2003All 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
(1
996
=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 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 1995-03
Ann
ual C
ontr
ibut
ion
(%)
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.
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
Ann
ua
l Co
ntr
ibu
tion
(%
)
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 C
on
trib
uti
on
(%
)
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 C
on
trib
uti
on
(%
)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
Capital Input Contribution by Country: World and Regions
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.0019
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
World G7 Developing Asia Non-G7 Latin America Eastern Europe Sub-SaharanAfrica
N. Africa &MiddleEast
An
nu
al C
on
trib
uti
on
(%
)
Non-IT IT
Capital Input Contribution by Country: Non-G7 Industrialized
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
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.
An
nu
al C
on
trib
uti
on
(%
)
Non-IT IT
Capital Input Contribution by Country: Eastern Europe
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.0019
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
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Albania Armenia Bulgaria Croatia CzechRepublic
Estonia Georgia Hungary KyrgyzRepublic
Latvia Lithuania Moldova Poland Romania Slovakia Slovenia Ukraine
An
nual
Con
trib
utio
n (
%)
Non-IT IT
Capital Input Contribution by Country: BRIC
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1989-1995 1995-2001 1989-1995 1995-2001 1989-1995 1995-2001 1989-1995 1995-2001
Brazil Russia India China
An
nu
al C
on
trib
uti
on
(%
)
Non-IT IT
WORLD GROWTH RESURGENCE: IT Investment and Productivity Growth.
LABOR INPUT GROWTH:
Hours Worked and Labor Quality.
TOTAL FACTOR PRODUCTIVITY:
IT-Production versus Non-IT Production.
SOURCES OF 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 1995-03
Ann
ual C
ontr
ibut
ion
(%)
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 C
on
trib
uti
on
(%
)
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 Economic Growth by Country: World and Regions
-8.50
-6.50
-4.50
-2.50
-0.50
1.50
3.50
5.50
7.50
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
1989-1995
1995-2001
World G7 Developing Asia Non-G7 Latin America Eastern Europe Sub-Saharan Africa N. Africa &Middle East
An
nu
al C
on
trib
uti
on
(%
)
Hours Labor Quality Non-IT Capital IT Capital TFP
Sources of Economic Growth by Country: Non-G7 Industrialized
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
1989
-199
519
95-2
001
Australia Austria Belgium Denmark Finland Greece Ireland Israel Netherlands NewZealand
Norway Portugal Spain Sweden Switz.
An
nu
al C
on
trib
uti
on
(%
)
Hours Labor Quality Non-IT Capital IT Capital TFP
Sources of Economic Growth by Country: Eastern Europe
-25.00
-20.00
-15.00
-10.00
-5.00
0.00
5.00
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
1989
-199
5
1995
-200
1
1989
-199
5
1995
-200
1
Albania Armenia Bulgaria Croatia CzechRepublic
Estonia Georgia Hungary KyrgyzRepublic
Latvia Lithuania Moldova Poland Romania Slovakia Slovenia Ukraine
An
nu
al C
on
trib
uti
on
(%
)
Hours Labor Quality Non-IT Capital IT Capital TFP
Sources of Economic Growth by Country: BRIC
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
1989-1995 1995-2001 1989-1995 1995-2001 1989-1995 1995-2001 1989-1995 1995-2001
Brazil Russia India China
An
nu
al C
on
trib
uti
on
(%
)
Hours Labor Quality Non-IT Capital IT Capital 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.