Decomposing Productivity Growth in the U.S. Computer Industry

In this paper, we examine the sources of the productivity growth in the U.S. computer industry from 1978 to 1999. We estimate a joint production model of output quantity and quality that distinguishes two types of technological changes: process and product innovations. Based on the estimation results, we decompose total factor productivity (TFP) growth rate into the contributions of process and product innovations and scale economies. The results show that product innovation associated with better quality accounts for about 30 percent of the TFP growth in the computer industry. Furthermore, we find that the TFP acceleration in the computer industry in the late 1990s is mainly derived from a rapid increase in product innovation.

The Structure of Adjustment Costs in Information Technology Investment

We examine the pattern of information technology (IT) capital adjustment using data from U.S. industries. Using the gap between actual and desired IT capital stocks, we estimate the shape of the adjustment cost function in IT investment. Both ordinary least squares and nonparametric regression estimates support irreversibility in IT investment.

Creative Destruction and Firm-Specific Performance Heterogeneity

Traditional U.S. industries with higher firm-specific stock return and fundamentals performance heterogeneity use information technology (IT) more intensively and post faster productivity growth in the late 20th century. We argue that elevated firm performance heterogeneity mechanically reflects a wave of Schumpeter's (1912) creative destruction disrupting a wide swath of U.S. industries, with newly successful IT adopters unpredictably undermining established firms. This evidence validates endogenous growth theory models of creative destruction, such as Aghion and Howitt (1992); and suggests that recent findings of more elevated firm-specific performance variation in richer, faster growing countries with more transparent accounting, better financial systems, and more secure property rights might partly reflect more intensive creative destruction in those economies.

Patterns of Comovement: The Role of Information Technology in the U.S. Economy

Firm-specific variation in stock returns and fundamental performance measures is significantly higher in industries that have a history of more investment in information technology (IT). We hypothesise that IT is associated with creative destruction or product differentiation, either of which can widen the performance difference between winner and loser firms. Thus, economy-level volatility can fall while firm-level volatility rises because firm-specific volatility cancels out in the aggregate. Our results are consistent with rising firm-specific variation in US stocks reflecting a rising pace of creative destruction; and with greater firm-specific variation in richer and faster growing countries reflecting more intensive creative destruction in those economies, though other explanations are probably valid as well.

Productivity, Wages, and Marriage: The Case of Major League Baseball

The effect of marriage on productivity and, consequently, wages has been long debated in economics. A primary explanation for the impact of marriage on wages has been through its impact on productivity, however, there has been no direct evidence for this. In this paper, we aim to fill this gap by directly measuring the impact of marriage on productivity using a sample of professional baseball players from 1871 - 2007. Our results show that only lower ability men see an increase in productivity, though this result is sensitive to the empirical specification and weakly significant. In addition, despite the lack of any effect on productivity, high ability married players earn roughly 16 - 20 percent more than their single counterparts. We discuss possible reasons why employers may favor married men

Information Technology and the Demand for Educated Workers: Disentangling the Impacts of Adoption versus Use

This paper examines the effect of information technology (IT) on the relative demand for educated workers in U.S. industries from 1960 to 1996. After decomposing this effect into IT use and adoption, I find that the use of IT is complementary with educated workers, and that educated workers have a comparative advantage in the adoption of IT. In total, IT use and adoption effects account for almost 40% of the acceleration in demand for educated workers since 1970. Moreover, the adoption of IT explains about one-third of the total IT effect on the acceleration in skill upgrading in the 1970s. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Declining output growth volatility: A sectoral decomposition

A decomposition of the U.S. aggregate output growth volatility using two-digit industry-level data shows that more than 60% of the post-1983 reduction in aggregate output growth volatility is attributed to the lowered comovement in total factor productivity (TFP) growth between industries. In contrast, stabilized input and TFP growths within an industry contribute little.Great moderation Total factor productivity Volatility

Technology Shocks and Employment: Evidence from U.S. Firm-Level Data

By examining firm-level data from the U.S. manufacturing sector, we show that the short-run employment response to technology shock exhibits substantial cross-industry variation. We find that firms in industries with low inventory-sales ratios employ more workers in response to a favorable technology shock, while those with high inventory-sales ratios employ fewer workers. These results are consistent with Chang, Hornstein, and Sarte (2009) who emphasize the role of inventory-holding costs in intertemporal substitution of production. However, we could not find any systematic relationship between employment response to technology shock and the price-stickiness measure.

Decomposing Productivity Growth in the U.S. Computer Industry

In this paper, we examine the sources of the productivity growth in the U.S. computer industry from 1978 to 1999. We estimate a joint production model of output quantity and quality that distinguishes two types of technological changes: process and product innovations. Based on the estimation results, we decompose total factor productivity (TFP) growth rate into the contributions of process and product innovations and scale economies. We find that product innovation associated with better quality accounts for about 30% of the TFP growth in the computer industry. Furthermore, the TFP acceleration in the computer industry in the late 1990s is mainly derived from a rapid increase in product innovation. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.