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Assessing The Productivity Of Information Technology Equipment In U.S. Manufacturing Industries

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  • Catherine J. Morrison

Abstract

We assess the cost-reducing impacts of increasing stocks of "high-tech" equipment (O capital). Our empirical analysis is based on a dynamic production theory model and annual data for two-digit U.S. manufacturing industries (1952-1991). We find evidence of overinvestment in O capital in the mid to late 1980s, following a period of strong investment incentives in the late 1970s. By the end of the 1980s, however, the returns to investment and falling prices for O capital more than justified the high investment levels in nondurable-goods industries, and the benefit-cost ratio was also increasing for durable-goods industries. The underlying substitution patterns suggest that high-tech capital expansion increases demand for most capital and noncapital inputs overall, but saves on materials inputs. In durables industries, however, both energy and "other" capital appear somewhat substitutable with O capital, and in nondurables industries increasing high-tech intensity may be a factor underlying stagnating labor demand. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Catherine J. Morrison, 2000. "Assessing The Productivity Of Information Technology Equipment In U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 471-481, August.
  • Handle: RePEc:tpr:restat:v:79:y:2000:i:3:p:471-481
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    1. Paul Osterman, 1986. "The Impact of Computers on the Employment of Clerks and Managers," ILR Review, Cornell University, ILR School, vol. 39(2), pages 175-186, January.
    2. Martin Neil Baily & Robert J. Gordon, 1988. "The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 347-432.
    3. Dudley, Leonard & Lasserre, Pierre, 1989. "Information as a substitute for inventories," European Economic Review, Elsevier, vol. 33(1), pages 67-88, January.
    4. Lester C. Thurow, 1987. "Economic Paradigms and Slow American Productivity Growth," Eastern Economic Journal, Eastern Economic Association, vol. 13(4), pages 333-343, Oct-Dec.
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