Source:
Economics of Innovation and New Technology, Issue 3-4, p.183-199 (1995)
Keywords:
computers;
productivity;
information technology;
production function estimation;
services;
manufacturing
Abstract:
Despite evidence that information technology (IT) has recently become a productive investment for a large cross-section of firms, a number of questions remain. Some of these issues can be addressed by extending the basic production function approach that was applied in early work. Specifically, in this short paper we: 1) control for individual firm differences in productivity by employing a "fixed effects" specification, 2) consider the more flexible translog specification instead of only the Cobb-Douglas specification, and 3) allow all parameters to vary between subsectors of the economy.
We find that while "firm effects" may account for as much as half of the productivity benefits imputed to IT in earlier studies, the elasticity of IT remains positive and statistically significant. We also find that the estimates of IT elasticity and and marginal product are little-changed when the less restrictive translog production function is employed. Finally, we find only limited eficence of differences in IT's marginal product between manufacturing and services and between the "measurable" and "unmeasurable" sectors of the economy. Surprisingly, we find that th emarginal product of IT is at least as high in firms that did not grow during the 1998-1992 sample period as it is in firms that grew.
Notes:
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