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

  • Sung-Bae Mun
  • M. Ishaq Nadiri
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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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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9272.

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    Date of creation: Oct 2002
    Date of revision:
    Handle: RePEc:nbr:nberwo:9272
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    4. Erik Brynjolfsson & Chris F. Kemerer, 1993. "Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market," Working Paper Series 158, MIT Center for Coordination Science.
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    7. Adam B. Jaffe & Josh Lerner & Scott Stern, 2002. "Innovation Policy and the Economy, Volume 2," NBER Books, National Bureau of Economic Research, Inc, number jaff02-1, December.
    8. Neil Gandal, 1994. "Hedonic Price Indexes for Spreadsheets and an Empirical Test for Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 160-170, Spring.
    9. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    10. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
    11. Jeffrey I. Bernstein, 2000. "Canadian Manufacturing, U.S. R&D Spillovers, And Communication Infrastructure," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 608-615, November.
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