Given the slowdown in labour productivity growth in the mid-2000s, some have argued that the boost to labour productivity from IT may have run its course. This article contributes three types of evidence to this debate. First, we show that since 2004 IT has continued to make a significant contribution to U.S. labour productivity growth, though it is no longer providing the boost that it did during the productivity resurgence from 1995 to 2004. Second, we present evidence that semiconductor technology, a key ingredient of the IT revolution, has continued to advance at a rapid pace. Finally, we develop projections of growth in trend labour productivity in the U.S. non-farm business sector. The baseline projection of about 1¾ per cent a year is better than recent history but is still below the long-run average of 2¼ per cent. However, we see a reasonable prospect — particularly given the ongoing advance in semiconductors — that the pace of labour productivity growth could rise back up to the long-run average. While the evidence is far from conclusive, we judge that "No, the IT revolution is not over."

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Is the Information Technology Revolution Over

This chapter covers the theory and methods for productivity measurement for nations. Labor, multifactor and total factor productivity measures are defined and are related to each other and to gross domestic product (GDP) per capita. Their growth over time and relative counterparts are defined as well. Different conceptual meanings have been proposed for a total factor productivity growth (TFPG) index. These are easiest to understand for the case in which the index number problem is absent: a production process that involves one input and one output (a 1-1 process). It is easily seen that four common concepts of TFPG all lead to the same result in the 1-1 case. Moving on to a general N input, M output production scenario, we demonstrate that a Paasche, Laspeyres or Fisher index number formula provides a measure for all four of the concepts of TFPG introduced for the 1-1 case. This is an advantage of the Paasche-Laspeyres-Fisher family of formulas. When multiple inputs or outputs are involved, there is the problem of choosing among alternative functional forms. The axiomatic and economic approaches to index formula choice are reviewed. In addition, we briefly cover the Divisia index number approach and growth accounting, including the KLEMS (capital, labor, energy, materials and services) approach. The gross output measures of the KLEMS approach are contrasted with value added output measures such as GDP. Also, an alternative family of revenue function based productivity growth indexes proposed by Diewert, Kohli and Morrison (DKM) is outlined. The DKM approach facilitates the decomposition of productivity growth into economically meaningful components. This approach is useful, for example, for examining the effects of changes in the terms of trade on productivity growth.

/pdf/the-measurement-of-productivity-for-nations-su5k0yz5k3.pdf

The Measurement of Productivity for Nations

The National Income and Product Accounts

“Moore’s Law” in the semiconductor manufacturing industry is used to describe the predictable historical evolution of a single manufacturing technology platform that has been continuously reducing the costs of fabricating electronic circuits since the mid-1960s. Some features of its future evolution were first correctly predicted by Gordon E. Moore in 1965, and Moore’s Law became an industry synonym for continuous, periodic reduction in both size and cost for electronic circuit elements. This paper develops develops some stylized economic facts, reviewing why and how this progression in manufacturing technology delivered a 20 to 30 percent annual decline in the cost of manufacturing a transistor, on average, as long as it continued. Other characteristics associated with smaller feature sizes would be expected to have additional economic value, and historical trends for these characteristics are reviewed. Lower manufacturing costs alone pose no special challenges for price and innovation measurement, but these other benefits do, and motivate quality adjustment methods when semiconductor product prices are measured. Empirical evidence of recent changes to the historical Moore’s Law trajectory is analyzed, and shows a slowdown in Moore’s Law as measured by prices for the highest volume products: memory chips, custom chip designs outsourced to dedicated contract manufacturers (foundries), and Intel microprocessors. Evidence to the contrary, which relates primarily to Intel microprocessors is reviewed, as are economic reasons why Intel microprocessor prices might behave differently from prices for other types of semiconductor chips. A computer architecture textbook model of how chip characteristics affect microprocessor performance is specified and tested in a structural econometric model of microprocessor computing performance. This simple econometric model, using only a small set of explanatory chip characteristics, explains 99% of variance across processor models in performance on commonly used performance benchmarks. This small set of characteristics should clearly be included in any hedonic model of computer or processor prices. Most of these chip characteristics also affect chip production cost, and therefore have an additional rationale for inclusion in a hedonic model that is separate from their demand-side effects on computer performance metrics relevant to users.

/pdf/measuring-moore-s-law-evidence-from-price-cost-and-quality-3x9qykit4n.pdf

Measuring Moore’s Law: Evidence from Price, Cost, and Quality Indexes

Moore's law in the semiconductor industry came to mean regular, predictable introductions of new manufacturing technology that enabled denser electronics. Adoption of new manufacturing technology, and its effect on silicon wafer-processing costs, determined how rapidly transistor manufacturing costs declined. In recent years, both cost decline rates and other economically valuable technical benefits flowing from use of the newest chip-making technology seem to have substantially diminished.

Has Moore's Law Been Repealed? An Economist's Perspective

. In the last 20 years, the expenditure share of prepackaged software in the national output has grown. The large number of characteristics in computer software make hedonic regression techniques impractical for purposes of controlling for quality changes. In this study, matched model price indices are constructed using monthly scanner data on prices and unit values for various prepackaged computer software titles and categories sold in Canada from January 1996 to June 2000. Quality differences are controlled for by applying the maximum overlap method. Results show that prices declined during the period studied at an average annual rate of 5.9%. JEL classification: C43, L86



Un indice de prix de logiciel a partir de donnees scanographiques.  Au cours des derniers 20 ans, la portion des depenses pour les logiciels dans la depense nationale s’est accrue. Le vaste eventail de caracteristiques des logiciels rend l’utilisation des techniques de regression hedonique inutilisable a cause de leur incapacitea normaliser les changements de qualite. Dans ce texte, on construit des indices de prix mensuels a partir de donnees scanographiques sur les prix et valeurs unitaires pour differentes familles de logiciels vendus au Canada entre janvier 1996 et juin 2000. Les differences de qualite sont controlees en utilisant la methode du maximum de recoupement. Les resultats indiquent que les prix ont chute au cours de la periode etudiee a un rythme annuel de 5.9%

A computer software price index using scanner data

In the last 20 years, the expenditure share of prepackaged software in the national output has grown. The large number of characteristics in computer software make hedonic regression techniques impractical for purposes of controlling for quality changes. In this study, matched model price indices are constructed using monthly scanner data on prices and unit values for various prepackaged computer software titles and categories sold in Canada from January 1996 to June 2000. Quality differences are controlled for by applying the maximum overlap method. Results show that prices declined during the period studied at an average annual rate of 5.9%.

https://papers.ssrn.com/sol3/Delivery.cfm/caje_313.pdf?abstractid=772999&mirid=5

A Computer Software Price Index Using Scanner Data

This study investigates how institutional quality influences labor productivity in West Africa. Thus, a panel of 15 Economic Community of West African States (ECOWAS) member states over the period 2005-2017 was considered. The panel was analyzed for the primary, secondary, and tertiary sectors. For the empirical analysis, a panel fixed effect regression was conducted based on a neoclassical framework. Results show that institutional quality improvement is overall associated with higher levels of productivity, regardless of the sector. Some specificities were also observed at the sectoral levels. Furthermore, the econometric analysis reconfirms a positive effect of investment and human capital on productivity. Therefore, improving institutional quality would be helpful for productivity growth in this sub-region. This event could enable ECOWAS member states to reap greater benefits from the implementation of the African Continental Free Trade Area agreement.

Dimitri Sanga

Papers

A computer software price index using scanner data

A Computer Software Price Index Using Scanner Data

Institutional Quality and Labour Productivity: Evidence from the Economic Community of West African States Countries