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Information Technology Externalities: Empirical Evidence from 42 U.S. Industries

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Author Info
Mun, S-B.
Nadiri, M.I.
Abstract

Using interindustry transaction in input-output tables, we examine Information Technology (IT) externalities in U.S. private industries over the period 1984-2000. Our empirical results show that computerization of an industry's customer and supplier industries reduces both labor and material costs of the industry. Moreover, cost savings driven by supplier industries are larger than those driven by customer industries. We also find that industries in the services sector enjoy more benefits from IT spillovers than industries in other sectors because of their high IT capital intensity and composition of interindustry transaction. Decomposition of total factor productivity (TFP) suggests that IT externalities can explain considerable parts of TFP growth, although possible mismeasurement of output in services industries leads to exacerbated technical changes of services industries.

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Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 02-03.

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Length: 44 pages
Date of creation: 2002
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Handle: RePEc:cvs:starer:02-03

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Related research
Keywords: INFORMATION TECHNOLOGY; NETWORK EXTERNALITY; INPUT-OUTPUT TABLE; TOTAL FACTOR PRODUCTIVITY;

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Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October. [Downloadable!] (restricted)
  2. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1993. "Production, Financial Structure and Productivity Growth in U.S. Manufacturing," NBER Working Papers 4309, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Erik Brynjolfsson & Chris F. Kemerer, 1993. "Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market," Working Paper Series 158, MIT Center for Coordination Science. [Downloadable!]
  4. Wolff, Edward N. & Ishaq Nadiri, M., 1993. "Spillover effects, linkage structure, and research and development," Structural Change and Economic Dynamics, Elsevier, vol. 4(2), pages 315-331, December. [Downloadable!] (restricted)
  5. Neil Gandal, 1994. "Hedonic Price Indexes for Spreadsheets and an Empirical Test for Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 160-170, Spring. [Downloadable!] (restricted)
  6. Economides, Nicholas, 1996. "The economics of networks," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 673-699, October. [Downloadable!] (restricted)
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  7. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall. [Downloadable!] (restricted)
  8. Jeffrey I. Bernstein, 2000. "Canadian Manufacturing, U.S. R&D Spillovers, And Communication Infrastructure," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 608-615, November. [Downloadable!] (restricted)
  9. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January. [Downloadable!] (restricted)
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  10. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mirko Draca & Raffaella Sadun & John Van Reenen, 2006. "Productivity and ICT: A Review of the Evidence," CEP Discussion Papers dp0749, Centre for Economic Performance, LSE. [Downloadable!]
  2. Claudio A. Piga & Giuseppe Medda, 2007. "Technological Spillovers and Productivity in Italian Manufacturing Firms," Discussion Paper Series 2007_17, Department of Economics, Loughborough University, revised Jul 2007. [Downloadable!]
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