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Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach

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Author Info

  • Jeremy Greenwood

    (University of Pennsylvania)

  • Karen A. Kopecky

    () (Federal Reserve Bank of Atlanta)

Abstract

The welfare gain to consumers from the introduction of personal computers is estimated here. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero. This implies that the good won't be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated/estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is in the range of 2 to 3 percent of consumption expenditure.

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File URL: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_559.pdf
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Bibliographic Info

Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 559.

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Length: 25 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:roc:rocher:559

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Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

Related research

Keywords: Compensating Variation; Computers; Electricity; Equivalent Variation; Technological Progress; Tornqvist Price Index; Welfare Gain.;

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