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Computers and Productivity: Are Aggregation Effects Important?

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  • Robert H. McGuckin

    (The Conference Board)

  • Kevin Stiroh

    ()
    (Federal Reserve Bank of New York (formerly with The Conference Board))

Abstract

This paper examines the empirical implications of aggregation bias when measuring the productive impact of computers. To isolate two specific aggregation problems relating to "aggregation in variables" and "aggregation in relations," we compare various production function estimates across a range of specifications, econometric estimators, and data levels. The results show that both sources of bias are important, especially as one moves from the sector to the economy level, and when the elasticity of all types of non-computer capital are incorrectly restricted to be equal. In terms of computers, however, the estimated elasticity is surprisingly stable between industry and sector regressions and does not appear to be biased by the incorporation of a restrictive measure of non-computer capital. The data consistently show that computers have a large impact on output.

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File URL: http://www.conference-board.org/economics/workingpapers.cfm?pdf=E-0003-00-WP
File Function: First version, 2000
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Bibliographic Info

Paper provided by The Conference Board, Economics Program in its series Economics Program Working Papers with number 00-03.

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Length: 33 pages
Date of creation: Aug 2000
Date of revision:
Publication status: Published in Economic Inquiry, Vol. 40, No. 1, January 2002, pages 42-59.
Handle: RePEc:cnf:wpaper:0003

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  1. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  2. Robert H Mcguckin & Bradford J Jensen, 1996. "Firm Performance And Evolution Empirical Regularities In The U.S. Microdata," Working Papers 96-10, Center for Economic Studies, U.S. Census Bureau.
  3. Erik Brynjolfsson & Lorin Hitt, 1997. "Information Technology as a Factor of Production: The Role of Differences Among Firms," Working Paper Series 201, MIT Center for Coordination Science.
  4. Franklin M. Fisher & John Monz (ed.), 1992. "Aggregation: Aggregate Production Functions and Related Topics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561832, December.
  5. Stephen D. Oliner & Daniel E. Sichel, 1994. "Computers and Output Growth Revisited: How Big Is the Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 273-334.
  6. Donald Siegel, 1997. "The Impact Of Computers On Manufacturing Productivity Growth: A Multiple-Indicators, Multiple-Causes Approach," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 68-78, February.
  7. Stiroh, Kevin J, 1998. "Computers, Productivity, and Input Substitution," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 175-91, April.
  8. John C. Haltiwanger, 1997. "Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence," Review, Federal Reserve Bank of St. Louis, issue May, pages 55-78.
  9. Charles Steindel, 1992. "Manufacturing productivity and high-tech investment," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 39-47.
  10. Aizcorbe, Ana M, 1990. "Testing the Validity of Aggregates," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(4), pages 373-83, October.
  11. Surendra Gera & Wulong Wu & Frank C. Lee, 1999. "Information technology and productivity growth: an empirical analysis for Canada and the United States," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 384-407, April.
  12. Jorgenson, D.W. & Stiroh, K., 1994. "Computers abd Growth," Harvard Institute of Economic Research Working Papers 1707, Harvard - Institute of Economic Research.
  13. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
  14. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
  15. Joseph H. Haimowitz, 1998. "Has the surge in computer spending fundamentally changed the economy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 27-42.
  16. repec:fth:harver:1487 is not listed on IDEAS
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Cited by:
  1. Desmet, Klaus & Rossi-Hansberg, Esteban, 2007. "Spatial Growth and Industry Age," CEPR Discussion Papers 6421, C.E.P.R. Discussion Papers.
  2. Rouben Indjikain & Donald S. Siegel, 2004. "The Impact of Investment in IT on Economic Performance: Implications for Developing Countries," Rensselaer Working Papers in Economics 0414, Rensselaer Polytechnic Institute, Department of Economics.
  3. Duggal, Vijaya G. & Saltzman, Cynthia & Klein, Lawrence R., 2007. "Infrastructure and productivity: An extension to private infrastructure and it productivity," Journal of Econometrics, Elsevier, vol. 140(2), pages 485-502, October.

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