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How do firms respond to cheaper computers? Microeconometric evidence for France based on a production function approach

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Author Info

  • P. BISCOURP

    (Insee)

  • B. CRÉPON

    (Insee)

  • T. HECKEL

    (Insee)

  • N. RIEDINGER

    (Insee)

Abstract

The continuous innovation process experienced by the information technology industries over the last decades has caused the price of computer power to decrease dramatically. This has led many firms to invest massively in increasingly efficient computers. This paper is an attempt to assess the impact of the fall of the cost of this particular input, on the performances of firms in terms of marginal cost, aggregate labor demand and employment by skill. Unlike most studies dealing with the technological bias issue, most of which rely on the estimation of factor demand equations, our evaluation of the complementarities between computers, skilled and unskilled labor rests on the sole estimation of a production function. We define a set of parameters of interest, depending on the observations and on the structural parameters of the production function, enabling us to examine the impact of the computer price decrease on marginal cost, labor demand and the relative demand for skills. Using a panel of more than 5000 continuing French firms followed between 1994 and 1997, we estimate a translog production function and find that the effects of the decrease in the price of computers have been large, both in terms of marginal cost reduction and in terms of skill structure. A 15% fall of the computer price should lead to a decrease of around 0.7% in the marginal cost of production and to a rise of about 3.5% of the skilled to unskilled ratio, other input prices being held fixed.

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Bibliographic Info

Paper provided by Institut National de la Statistique et des Etudes Economiques, DESE in its series Documents de Travail de la DESE - Working Papers of the DESE with number g2002-05.

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Date of creation: 2002
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Handle: RePEc:crs:wpdeee:g2002-05

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Related research

Keywords: Computers; production function; marginal cost; factor demands; technological bias;

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Cited by:
  1. Behaghel, Luc & Caroli, Eve & Roger, Muriel, 2011. "Age Biased Technical and Organisational Change, Training and Employment Prospects of Older Workers," IZA Discussion Papers 5544, Institute for the Study of Labor (IZA).
  2. Florian Pelgrin & Arnaud Sylvain & Eric Heyer, 2004. "Capital operating time and working time in the production function : an evaluation on a panel firms over the period 1989-2001," Sciences Po publications 2004-09, Sciences Po.
  3. Hempell, Thomas, 2002. "What's Spurious, What's Real? Measuring the Productivity Impacts of ICT at the Firm-Level," ZEW Discussion Papers 02-42, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Ketteni, Elena & Mamuneas, Theofanis P. & Stengos, Thanasis, 2007. "Nonlinearities in economic growth: A semiparametric approach applied to information technology data," Journal of Macroeconomics, Elsevier, vol. 29(3), pages 555-568, September.
  5. Patrick Aubert & Eve Caroli & Muriel Roger, 2005. "Nouvelles technologies et nouvelles formes d'organisation du travail : quelles conséquences pour l'emploi des salariés âgés ?," PSE Working Papers halshs-00590793, HAL.
  6. Eric Heyer & Florian Pelgrin & Arnaud Sylvain, 2004. "Capital Operating Time and Working Time in the Production Function: An Evaluation on a Panel of French Firms over the Period 1989-2001," Documents de Travail de l'OFCE 2004-09, Observatoire Francais des Conjonctures Economiques (OFCE).
  7. Yoann Barbesol & Thomas Heckel & Simon Quantin, 2009. "IT Capital Elasticity of Production: Estimates using Corporate Data," Economie et Statistique, Institut National de la Statistique et des Etudes Economiques, vol. 419, pages 55-71, August.
  8. Maliranta, Mika & Rouvinen, Petri, 2003. "Productivity Effects of ICT in Finnish Business," Discussion Papers 852, The Research Institute of the Finnish Economy.
  9. Shahbaz, Muhammad & Sbia, Rashid & HAMDI, Helmi & Ur Rehman, Ijaz, 2014. "The Role of Information Communication Technology and Economic Growth in Recent Electricity Demand: Fresh Evidence from Combine Cointegration Approach in UAE," MPRA Paper 53226, University Library of Munich, Germany, revised 25 Jan 2014.
  10. repec:hal:wpaper:halshs-00590793 is not listed on IDEAS
  11. Eric Heyer & Florian Pelgrin & Arnaud Sylvain, 2004. "Translog ou Cobb-Douglas? Le rôle des durées d'utilisation des facteurs," Working Papers 04-19, Bank of Canada.
  12. Elena Ketteni & Theofanis Mamuneas & Panos Pashardes, 2013. "ICT and Energy Use: Patterns of Substitutability and Complementarity in Production," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 7(1), pages 63-86, June.

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