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ICT Prices and ICT Services: What Do They Tell Us About Productivity and Technology

Author

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  • Dave Byrne

    ()

  • Carol Corrado

    ()

Abstract

This article reassesses the link between ICT prices, technology, and productivity. To understand how the ICT sector could come to the rescue of a whole economy, a multi-sector model developed by Oulton (2012) is extended to include ICT services and used to calibrate the steady-state contribution of the ICT sector to growth in aggregate U.S. labour productivity. The extended model also has implications for the relationship between prices for ICT services and prices for the ICT assets used to supply them, namely, that, ICT service prices may diverge from ICT asset prices and reflect productivity gains from ICT asset management by the sector. All told, because ICT technologies increasingly diffuse through the economy via purchased services (e.g. cloud services, data analytic services), they are not fully accounted for in the standard narrative of ICT’s contribution to economic growth. When this omission is corrected and the price indexes for ICT assets developed in Byrne and Corrado (2017a) are used to indicate the relative productivity of the ICT sector, its contribution to potential labour productivity growth is estimated to be substantially larger than generally thought — 1.4 percentage points per year.

Suggested Citation

  • Dave Byrne & Carol Corrado, 2017. "ICT Prices and ICT Services: What Do They Tell Us About Productivity and Technology," International Productivity Monitor, Centre for the Study of Living Standards, vol. 33, pages 150-181, Fall.
  • Handle: RePEc:sls:ipmsls:v:33:y:2017:8
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    File URL: http://www.csls.ca/ipm/33/Byrne_Corrado.pdf
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    References listed on IDEAS

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    1. Ernst R. Berndt & Neal J. Rappaport, 2001. "Price and Quality of Desktop and Mobile Personal Computers: A Quarter-Century Historical Overview," American Economic Review, American Economic Association, vol. 91(2), pages 268-273, May.
    2. Lee Branstetter & Daniel Sichel, 2017. "The Case for an American Productivity Revival," Policy Briefs PB17-26, Peterson Institute for International Economics.
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    Cited by:

    1. Lawrence, Robert Z., 2018. "Recent US Manufacturing Employment: The Exception that Proves the Rule," Working Paper Series rwp18-002, Harvard University, John F. Kennedy School of Government.

    More about this item

    Keywords

    Information and Internet Services; Labour Productivity; Prices; Multi-sector Growth Model; Economic Growth.;

    JEL classification:

    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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