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Assessing The Productivity Of Information Technology Equipment In U.S. Manufacturing Industries

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Author Info
Catherine J. Morrison

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Abstract

We assess the cost-reducing impacts of increasing stocks of "high-tech" equipment (O capital). Our empirical analysis is based on a dynamic production theory model and annual data for two-digit U.S. manufacturing industries (1952-1991). We find evidence of overinvestment in O capital in the mid to late 1980s, following a period of strong investment incentives in the late 1970s. By the end of the 1980s, however, the returns to investment and falling prices for O capital more than justified the high investment levels in nondurable-goods industries, and the benefit-cost ratio was also increasing for durable-goods industries. The underlying substitution patterns suggest that high-tech capital expansion increases demand for most capital and noncapital inputs overall, but saves on materials inputs. In durables industries, however, both energy and "other" capital appear somewhat substitutable with O capital, and in nondurables industries increasing high-tech intensity may be a factor underlying stagnating labor demand. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 79 (2000)
Issue (Month): 3 (August)
Pages: 471-481
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Handle: RePEc:tpr:restat:v:79:y:2000:i:3:p:471-481

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  1. Gunnarsson, Gudmundur & Mellanden, Erik & Savvidou, Eleni, 2004. "Human capital is the key to the IT productivity paradox," Working Paper Series 2004:13, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
  2. Ronald H. Schmidt, 1993. "Computers and productivity," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue May 14. [Downloadable!]
  3. Brynjolfsson, Erik. & Hitt, Lorin M., 1994. "Information technology as a factor of production : the role of differences among firms," Working papers 3715-94. CCSTR ; #173., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
    Other versions:
  4. Ernst R. Berndt & Catherine J. Morrison & Larry S. Rosenblum, 1992. "High-Tech Capital Formation and Labor Composition in U.S. Manufacturing Industries: An Exploratory Analysis," NBER Working Papers 4010, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Mellander, Erik & Savvidiou, Eleni & Gunnarsson, Gudmundur, 2001. "Is Human Capital the Key to the IT Productivity Paradox?," Working Paper Series 551, Research Institute of Industrial Economics. [Downloadable!]
  6. Bugamelli, M. & Pagano, P. & Paterno, F. & Pozzolo, A.F. & Rossi, S. & Schivardi, F., 2003. "Ingredients for The New Economy: How Much Does Finance Matter?," EIFC - Technology and Finance Working Papers 31, United Nations University, Institute for New Technologies. [Downloadable!]
    Other versions:
  7. Stengos, T., 2007. "Nonlinearities in Economic Growth: A Semiparametric Approach Applied to Information Technology Data," Working Papers 2007-1, University of Guelph, Department of Economics. [Downloadable!]
    Other versions:
  8. Shane M. Greenstein, 1994. "Did Computer Technology Diffuse Quickly?: Best and Average Practice in Mainframe Computers, 1968-1983," NBER Working Papers 4647, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Frank R. Lichtenberg, 1996. "The Output Contributions of Computer Equipment and Personnel: A Firm- Level Analysis," NBER Working Papers 4540, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Gianfranco Enrico Atzeni & Oliviero Antonio Carboni, 2005. "ICT productivity and firm propensity to innovative investment: learning effect evidence from italina micro data," Industrial Organization 0503012, EconWPA. [Downloadable!]
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  11. Daniel S. Hamermesh & Sharon M. Oster, 1998. "Tools or Toys? The Impact of High Technology on Scholarly Productivity," NBER Working Papers 6761, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Aekapol Chongvilaivan, 2008. "Learning by Exporting and High-tech Capital Deepening in Singapore Manufacturing Industries, 1974-2006," SCAPE Policy Research Working Paper Series 0804, National University of Singapore, Department of Economics, SCAPE. [Downloadable!]
  13. Atreya Chakraborty & Mark Kazarosian, 1999. "Product Differentiation and the Use of Information Technology: New Evidence from the Trucking Industry," Boston College Working Papers in Economics 433, Boston College Department of Economics. [Downloadable!]
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  14. Timothy Dunne & John Haltiwanger & Lucia Foster, 2000. "Wage and Productivity Dispersion in U.S. Manufacturing: The Role of Computer Investment," NBER Working Papers 7465, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Falk, Martin, 2001. "The impact of office machinery and computer capital on the demand for heterogeneous labor," ZEW Discussion Papers 01-66, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
  16. Brynjolfsson, Erik & Hitt, Lorin M., 2004. "Computing Productivity: Firm-Level Evidence," Working papers 4210-01, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
    Other versions:
  17. Baba Prasad & Patrick T. Harker, 1997. "Examining the Contribution of Information Technology Toward Productivity and Profitability in U.S. Retail Banking," Center for Financial Institutions Working Papers 97-09, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  18. Yasuo Nakanishi, 2005. "Empirical evidence of externalities of IT capital in Japan," Economics Bulletin, Economics Bulletin, vol. 15(18), pages 1-11. [Downloadable!]
  19. Savvidou, Eleni, 2003. "The Relationship Between Skilled Labor and Technical Change," Working Paper Series 2003:27, Uppsala University, Department of Economics. [Downloadable!]
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