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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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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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  1. Jeremy Greenwood & Gokce Uysal, 2004. "New Goods and the Transition to a New Economy," NBER Working Papers 10793, National Bureau of Economic Research, Inc.
  2. Chatterjee, Satyajit, 1994. "Transitional dynamics and the distribution of wealth in a neoclassical growth model," Journal of Public Economics, Elsevier, vol. 54(1), pages 97-119, May.
  3. Austan Goolsbee & Amil Petrin, 2004. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV," Econometrica, Econometric Society, vol. 72(2), pages 351-381, 03.
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  5. Hausman, J.A., 1994. "Valuation of New Goods Under Perfect and Imperfect Competition," Working papers 94-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Kongsamut, P. & Rebelo, S. & Xie, D., 1997. "Beyong Balanced Growth," RCER Working Papers 438, University of Rochester - Center for Economic Research (RCER).
  7. Jerry Hausman, 1997. "Cellular Telephone, New Products and the CPI," NBER Working Papers 5982, National Bureau of Economic Research, Inc.
  8. Rebelo, Sergio, 1992. "Growth in open economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 36(1), pages 5-46, July.
  9. Hersh, Jonathan & Voth, Hans-Joachim, 2009. "Sweet Diversity: Colonial Goods and the Rise of European Living Standards after 1492," CEPR Discussion Papers 7386, C.E.P.R. Discussion Papers.
  10. Austan Goolsbee & Peter J. Klenow, 2006. "Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet," Discussion Papers 05-010, Stanford Institute for Economic Policy Research.
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