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Information Technology Externalities: Empirical Evidence from 42 U.S. Industries

  • Mun, S-B.
  • Nadiri, M.I.
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    Using interindustry transaction in input-output tables, we examine Information Technology (IT) externalities in U.S. private industries over the period 1984-2000. Our empirical results show that computerization of an industry's customer and supplier industries reduces both labor and material costs of the industry. Moreover, cost savings driven by supplier industries are larger than those driven by customer industries. We also find that industries in the services sector enjoy more benefits from IT spillovers than industries in other sectors because of their high IT capital intensity and composition of interindustry transaction. Decomposition of total factor productivity (TFP) suggests that IT externalities can explain considerable parts of TFP growth, although possible mismeasurement of output in services industries leads to exacerbated technical changes of services industries.

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    File URL: http://econ.as.nyu.edu/docs/IO/9377/RR02-03.PDF
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    Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 02-03.

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    Length: 44 pages
    Date of creation: 2002
    Date of revision:
    Handle: RePEc:cvs:starer:02-03
    Contact details of provider: Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
    Phone: (212) 998-8936
    Fax: (212) 995-3932
    Web page: http://econ.as.nyu.edu/object/econ.cvstarr.html
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    1. Erik Brynjolfsson & Chris F. Kemerer, 1996. "Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market," Management Science, INFORMS, vol. 42(12), pages 1627-1647, December.
    2. W. Erwin Diewert & T.J. Wales, 1989. "Flexible Functional Forms and Global Curvature Conditions," NBER Technical Working Papers 0040, National Bureau of Economic Research, Inc.
    3. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    4. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
    5. Inoue, Tetsuya, 1998. "Impact of Information Technology and Implications for Monetary Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 16(2), pages 29-60, December.
    6. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1993. "Production, Financial Structure and Productivity Growth in U.S. Manufacturing," NBER Working Papers 4309, National Bureau of Economic Research, Inc.
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