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Measuring the Welfare Gain from Personal Computers

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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.

Suggested Citation

  • Jeremy Greenwood & Karen A. Kopecky, 2007. "Measuring the Welfare Gain from Personal Computers," Economie d'Avant Garde Research Reports 15, Economie d'Avant Garde.
  • Handle: RePEc:eag:rereps:15
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    References listed on IDEAS

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    1. Austan Goolsbee & Peter J. Klenow, 2006. "Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet," American Economic Review, American Economic Association, vol. 96(2), pages 108-113, May.
    2. Jeremy Greenwood & Gokce Uysal, 2005. "New Goods and the Transition to a New Economy," Journal of Economic Growth, Springer, vol. 10(2), pages 99-134, June.
    3. 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.
    4. Hausman, Jerry, 1999. "Cellular Telephone, New Products, and the CPI," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 188-194, April.
    5. 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, March.
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    Blog mentions

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    1. Café com açúcar
      by Leonardo Monasterio in Blog do Leonardo Monasterio on 2009-09-04 15:12:00
    2. Cofffe and Sugar
      by Leonardo Monasterio in Leonardo Monasterio's Blog on 2009-09-05 00:52:00

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    Cited by:

    1. Walid Hadhri & Mohamed Ayadi & Adel Ben Youssef, 2012. "Difference between Adoption and Access Frequency to Internet and Consumer Surplus," Post-Print halshs-00937177, HAL.
    2. Baruffaldi, Stefano H. & Di Maio, Giorgio & Landoni, Paolo, 2017. "Determinants of PhD holders’ use of social networking sites: An analysis based on LinkedIn," Research Policy, Elsevier, vol. 46(4), pages 740-750.
    3. Tim Leunig & Joachim Voth, 2011. "Spinning Welfare: the Gains from Process Innovation in Cotton and Car Production," CEP Discussion Papers dp1050, Centre for Economic Performance, LSE.
    4. Erik Brynjolfsson & Felix Eggers & Avinash Gannamaneni, 2018. "Using Massive Online Choice Experiments to Measure Changes in Well-being," NBER Working Papers 24514, National Bureau of Economic Research, Inc.
    5. Andreas Chai, 2018. "Household consumption patterns and the sectoral composition of growing economies: A review of the interlinkages," Discussion Papers in Economics economics:201802, Griffith University, Department of Accounting, Finance and Economics.
    6. Jonathan Hersh & Joachim Voth, 2009. "Sweet diversity: Colonial goods and the rise of European living standards after 1492," Economics Working Papers 1163, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2011.
    7. Smaranda Pantea & Bertin Martens, 2014. "The Value of the Internet for Consumers," JRC Working Papers on Digital Economy 2014-08, Joint Research Centre (Seville site).

    More about this item

    Keywords

    Compensating Variation; Computers; Electricity; Equivalent Variation; Fisher Ideal Price Index; New Goods; Technological Progress; Tornqvist Price Index; Welfare Gain;

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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