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Why Did Semiconductor Price Indexes Fall So Fast in the 1990s? A Decomposition

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  • Ana Aizcorbe

Abstract

Price deflators for semiconductors fell rapidly over the 1990s, pulled down by steep declines in the deflator for the microprocessor (MPU) segment that accelerated around 1995. A decomposition of a price index for Intel's MPUs suggests that virtually all of the declines in the price index--and the acceleration--can be attributed to quality increases associated with product innovation, rather than declines in the cost per chip. The sizable decline in Intel's margins from 1993--99 only accounted for about 6 percentage points of the average 24% decline per quarter in the price index and cannot explain the acceleration. (JEL D42, L63, O47) Copyright 2006, Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 44 (2006)
Issue (Month): 3 (July)
Pages: 485-496

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Handle: RePEc:oup:ecinqu:v:44:y:2006:i:3:p:485-496

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Cited by:
  1. Ana Aizcorbe & Nicole Nestoriak, 2010. "Price Indexes for Drugs: A Review of the Issues," BEA Working Papers 0050, Bureau of Economic Analysis.
  2. Aizcorbe, Ana & Bridgman, Benjamin & Nalewaik, Jeremy, 2010. "Heterogeneous car buyers: A stylized fact," Economics Letters, Elsevier, vol. 109(1), pages 50-53, October.
  3. Adam Hale Shapiro & Ana Aizcorbe, 2010. "Implications of Consumer Heterogeneity on Price Measures for Technology Goods," BEA Working Papers 0062, Bureau of Economic Analysis.
  4. Evans, Lewis & Greenstein, Shane, 2010. "Evidence of a Modest Price Decline in U.S. Broadband Services," Working paper 609, Regulation2point0.

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