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Why Did Semiconductor Price Indexes Fall So Fast in the 1990s? A Decomposition

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  • Ana Aizcorbe

Abstract

Price deflators for semiconductors fell rapidly over the 1990s, pulled down by steep declines in the deflator for the microprocessor (MPU) segment that accelerated around 1995. A decomposition of a price index for Intel's MPUs suggests that virtually all of the declines in the price index--and the acceleration--can be attributed to quality increases associated with product innovation, rather than declines in the cost per chip. The sizable decline in Intel's margins from 1993--99 only accounted for about 6 percentage points of the average 24% decline per quarter in the price index and cannot explain the acceleration. (JEL D42, L63, O47) Copyright 2006, Oxford University Press.

Suggested Citation

  • Ana Aizcorbe, 2006. "Why Did Semiconductor Price Indexes Fall So Fast in the 1990s? A Decomposition," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 485-496, July.
    • Handle: RePEc:oup:ecinqu:v:44:y:2006:i:3:p:485-496
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    File URL: http://hdl.handle.net/10.1093/ei/cbj027
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    Citations

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    Cited by:

    1. Adam Hale Shapiro, "undated". "Decomposing Supply and Demand Driven Inflation," RBA Annual Conference Papers acp2023-03, Reserve Bank of Australia, revised Nov 2023.
    2. Pangburn, Michael S. & Sundaresan, Shankar, 2009. "Capacity decisions for high-tech products with obsolescence," European Journal of Operational Research, Elsevier, vol. 197(1), pages 102-111, August.
    3. David M. Byrne & Stephen D. Oliner & Daniel E. Sichel, 2018. "How Fast are Semiconductor Prices Falling?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(3), pages 679-702, September.
    4. Ana Aizcorbe & Nicole Nestoriak, 2010. "Price Indexes for Drugs: A Review of the Issues," BEA Working Papers 0050, Bureau of Economic Analysis.
    5. Aizcorbe, Ana & Bridgman, Benjamin & Nalewaik, Jeremy, 2010. "Heterogeneous car buyers: A stylized fact," Economics Letters, Elsevier, vol. 109(1), pages 50-53, October.
    6. Adam Hale Shapiro & Ana Aizcorbe, 2010. "Implications of Consumer Heterogeneity on Price Measures for Technology Goods," BEA Working Papers 0062, Bureau of Economic Analysis.
    7. Ana M. Aizcorbe & Jeff Chen, 2022. "Outlet Substitution Bias Estimates for Ride Sharing and Taxi Rides in New York City," BEA Working Papers 0192, Bureau of Economic Analysis.
    8. Ana Aizcorbe & Jeffrey C. Chen, 2023. "Outlet Substitution Bias Estimates for Ride Sharing and Taxi Rides in New York City," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2023-02, Economic Statistics Centre of Excellence (ESCoE).
    9. Unni Pillai, 2013. "A Model of Technological Progress in the Microprocessor Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 61(4), pages 877-912, December.
    10. Unni Pillai, 2014. "Input price and industry concentration in a Cournot oligopoly," Economics Bulletin, AccessEcon, vol. 34(3), pages 1704-1713.
    11. Wen Chen, 2017. "Do stronger intellectual property rights lead to more R&D-intensive imports?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(7), pages 865-883, October.
    12. Greenstein, Shane & McDevitt, Ryan, 2011. "Evidence of a modest price decline in US broadband services," Information Economics and Policy, Elsevier, vol. 23(2), pages 200-211, June.
    13. Adam Hale Shapiro, 2022. "Decomposing Supply and Demand Driven Inflation," Working Paper Series 2022-18, Federal Reserve Bank of San Francisco.

    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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