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Computers, productivity and market structure


  • Luis Corchón

    () (Universidad de Alicante)

  • Simon Wilkie

    (California Institute of Technology)


Since the 1970's most industrialized countries have undertaken massiveinvestment in computers and information technology (IT). Several stylizedfacts emerge from the empirical studies, see Landauer, 1993. In particular,they have found that this investment has not lead to a general increase intotal factor productivity. This is known as the "productivity paradox". Also,some apparently inconsistent findings do emerge from these studies. Inparticular, the initial introduction of new IT by a firm tends to increase itsmarket share, and finally, there is evidence that while in most industriesproductivity has failed to increase, in monopolistic and regulated industriesthere is evidence that computers and IT have increased productivity. Wepresent a simple economic model of IT innovation. We find that in the model,measured productivity gains depends on rnarket structure. In fact the"productivity paradox" is most likely to emerge in markets dominated by asmall number of firms. It cannot emerge in either monopoly or highlycompetitive markets.

Suggested Citation

  • Luis Corchón & Simon Wilkie, 1994. "Computers, productivity and market structure," Working Papers. Serie AD 1994-17, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:1994-17

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    References listed on IDEAS

    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
    2. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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    Cited by:

    1. Carmen Bevi?Author-Email: & Luis C. Corch?n & Simon Wilkie, "undated". "Implementation of the Walrasian Correspondence by Market Games," UFAE and IAE Working Papers 493.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).

    More about this item


    Computers; productivity; slowdown; strategic investment;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection


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