May 26, 2003 - Relative Prices of Computers, Communications, Software, and Services, 1977-2000. All price indexes are divided by the output price index.
Economic Growth in the Information Age
By Dale W. Jorgenson Harvard University May 26, 2003
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).
Transistor Density on Micro Processors and Memory Chips
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,1977-2000 All price indexes are divided by the output price index. 1,000
Log Scale (1996=1)
100
10
1
0
0 1977
1982
1987
Computers
1992
Memory
Logic
1997
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
International SEMATECH
70
2000 Plan
50
Area for Future Acceleration
35 25 92
95
97
99
02
05
08
Semiconductor Roadmap Acceleration
11
Relative Prices of Computers, Communications, and Software, 1977-2000 All price indexes are divided by the output price index.
Log Scale (1996=1)
100
10
1
0 1977
1982 Computers
1987 Central Office Switching Equipment
1992 Prepackaged Software
1997
Relative Prices of Computers, Communications, Software, and Services, 1977-2000 Al priceindexesaredividedbytheoutputpriceindex.
Log Scale (1996=1)
100
10
1
0 1977
1982
Computers
1987
Communications
1992
Semiconductors
1997
Software
Services
ROLE OF INFORMATION TECHNOLOGY: IT Prices and the Growth of Output. OUTPUT SHARES OF IT: Computers, Communications Equipment, Semiconductors, Software, and IT Services.
OUTPUT CONTRIBUTION OF IT: IT versus Non-IT Value Added.
OUTPUT CONTRIBUTION BY TYPE: Computers, Communications Equipment, Semiconductors, Software, and IT Services.
Value Added Shares of Information Technology by Type, 1977-2000 Share of current dollar gross domestic product. 7 6 5
%
4
3 2 1 0 1977
1982
Computers
1987
Communications
Semiconductors
1992
Software
1997
Services
Total
Industry Contributions to Value Added Growth Domar-weighted contrubtions of industry value added 1.0
0.9
0.8
Annual Contribution (%)
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0 1977-1990
Computers
1990-1995
Communications
Semiconductors
Note: Services is the capital service flow from Household and Government IT capital.
1995-2000
Software
Services
Industry Contribution to Value Added 4.5
Average annual percentage growth rates, weighted by the value share.
Annual Contribution (%)
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1977-1990
1990-1995 Non IT IT
1995-2000
Industry Contributions to Value Added Growth, 1977-2000 Household Wholesale Trade Finance Professional and Social Svcs. Computers and Office Equipment Retail and Eating Real Estate (rental) Electronic Components Business Svc excl. Computer Government excl. Education Health private Other Services Agriculture Communications Computer Services Government Education Transportation Food and Tobacco Rubber and Plastic Electricity Government Enterprises Instruments and Miscellaneous Mfg. Communications Equipment Chemicals Printing and Publishing Legal Lumber, Wood, Furniture Fabricated Metal Other Transportation Equipment Paper Education, private Construction Textiles, Apparel, Leather Other Electrical Mach Insurance Motor Vehicles Stone, Clay, Glass Coal Mining Primary Metal Non Energy Mining Machinery excl. Computers Petroleum Refining Gas Oil and Gas Mining -0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
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.
Capital Input Contribution of Information Technology Average annual percentage growth rates, weighted by income shares. 2.50
Annual Contribution (%)
2.00
1.50
1.00
0.50
0.00 1977-1990
1990-1995 Non-IT Capital Services
IT Capital Services
1995-2000
Industry Contributions to Capital Input Growth, 1977-2000 Household Finance Wholesale Trade Business Svc excl. Computer Professional and Social Svcs Communications Government excl. Education Computer Services Retail and Eating Real Estate (rental) Insurance Machinery excl. Computers Printing and Publishing Government Enterprises Transportation Health private Other Services Electricity Instruments and Legal Chemicals Electronic Components Government Education Oil and Gas Mining Communications Equipment Food and Tobacco Other Transportation Construction Gas Fabricated Metal Computers and Office Other Electrical Mach Motor Vehicles Rubber and Plastic Stone, Clay, Glass Paper Textiles, Apparel, Leather Lumber, Wood, Furniture PrimaryMetal Agriculture Education, private Petroleum Refining Non energy Mining Coal Mining
-0.05
0.00
0.05
0.10
Note: Industries sorted by IT capital contribution.
0.15
0.20
0.25
0.30
0.35
0.40
0.45
IT Capital Non-IT Capital
Capital Input Contribution by Country 3.0
2.5
2.0
1.5
1.0
0.5
0.0 1980- 1990- 19951990 1995 2000 US
1981- 1990- 19951990 1995 2000 Canada
1980- 1990- 19951990 1995 2000 UK
1980- 1990- 19951990 1995 2000 France
Non-IT IT
1980- 1990- 19951990 1995 2000 Germany
1980- 1990- 19951990 1995 2000 Italy
1980- 1990- 19951990 1995 2000 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.
SourcesofU.S.TFPGrowth
Annual Average Contribution(%)
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4 1977-1990
1990-1995
1995-2000
Reallocation of Non-college Educated Labor
ReallocationofCollegeEducatedLabor
Reallocation of Non-IT Capital
Reallocation of IT Capital
Wgt Sectoral TFP (Other)
WgtSectoralTFP(ITProducers)
Industry Contributions to Productivity, 1977-2000 Computers and Office Equipment Electronic Components Wholesale Trade Agriculture Finance Food and Tobacco Textiles, Apparel, Leather Rubber and Plastic Real Estate (rental) Primary Metal Other Electrical Mach CoalMining CommunicationsEquipment Instruments and Miscellaneous Manuf. Retail and Eating Fabricated Metal Other Transportation Equipment Transportation Lumber, Wood, Furniture Electricity Stone, Clay, Glass Paper NonenergyMining Communications Government Enterprises Other Services Government Education Government excl. Education Household Motor Vehicles Chemicals Computer Services Education, private Petroleum Refining Printing and Publishing Business Svc excl. Computer Legal Machinery excl. Computers Professional and Social Svcs Gas Insurance OilandGasMining Health private Construction -0.15
-0.10
Note: Industries sorted by productivity contribution.
-0.05
0.00
0.05
0.10
0.15
0.20
Sources of TFP Growth by Country 2.00
1.50
1.00
0.50
0.00
-0.50
-1.00
-1.50 1980- 1990-19951990 1995 2000 US
1981-1990- 19951990 1995 2000 Canada
1980-1990- 19951990 1995 2000 UK
1980-1990-19951990 1995 2000 France
Non-ITTFP ITTFP
1980- 1990-19951990 1995 2000 Germany
1980- 1990-19951990 1995 2000 Italy
1980-1990- 19951990 1995 2000 Japan
Sources of Economic Growth by Country 5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0 1980- 1990- 19951990 1995 2000 US
1981- 1990- 19951990 1995 2000 Canada
1980- 1990- 19951990 1995 2000 UK
1980- 1990- 19951990 1995 2000 France
1980- 1990- 19951990 1995 2000 Germany
Labor Non-ITCapital ITCapital Non-ITTFP ITTFP
1980- 1990- 19951990 1995 2000 Italy
1980- 1990- 19951990 1995 2000 Japan
Sources of Growth in Industry Output, 1977-2000 Agriculture Non Energy Mining Coal Mining Oil and Gas Mining Construction Lumber, Wood, Furniture Stone, Clay, Glass Primary Metal Fabricated Metal Machinery excl. Computers Computers and Office Other Electrical Mach Communications Equipment Electronic Components Motor Vehicles Other Transportation Equipment Instruments and Miscellaneous Food and Tobacco Textiles, Apparel, Leather Paper Printing and Publishing Chemicals Petroleum Refining Rubber and Plastic Transportation Communications Electricity Gas Wholesale Trade Retail and Eating Finance Insurance Real Estate (rental) Computer Services Business Svc excl. Computer Health private Legal Education, private Professional and Social Svcs. Other Services Government Enterprises Household Government excl. Education Government Education -5
0
5 Intermediate
10 Labor
15 Capital
Productivity
20
25
Sources of U.S. Labor Productivity Growth 3.0
Average Annual Contribution (%)
2.5
2.0
1.5
1.0
0.5
0.0 1977-1990
1990-1995
1995-2000
-0.5
Labor Quality
Non-IT Capital Deepening
IT Capital Deepening
TFP
Sources of Industry Labor Productivity Growth, 1977-2000 Agriculture Non Energy Mining Coal Mining Oil and Gas Mining Construction Lumber, Wood, Furniture Stone, Clay, Glass Primary Metal Fabricated Metal Machinery excl. Computers Computers and Office Other Electrical Mach Communications Equipment Electronic Components Motor Vehicles Other Transportation Equipment Instruments and Miscellaneous Food and Tobacco Textiles, Apparel, Leather Paper Printing and Publishing Chemicals Petroleum Refining Rubber and Plastic Transportation Communications Electricity Gas Wholesale Trade Retail and Eating Finance Insurance Real Estate (rental) Computer Services Business Svc excl. Computer Health private Legal Education, private Professional and Social Svcs. Other Services Government Enterprises Household Government excl. Education Government Education -5
0 Capital Deepening
5
10 Intermediate Deepening
15 Labor Quality
20 Productivity
25
Sources of Labor Productivity Growth by Country 5.0
Annual Contribution (%)
4.0
3.0
2.0
1.0
0.0
-1.0 1980-1990-19951990 1995 2000 US
1981-1990-19951990 1995 2000 Canada
1980-1990-19951990 1995 2000 UK
1980-1990-19951990 1995 2000 France
1980-1990-19951990 1995 2000 Germany
Labor Quality CapitalDeepening TFP
1980-1990-19951990 1995 2000 Italy
1980-1990-19951990 1995 2000 Japan
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.
