1 Economics of Innovation Other Impact Manuel Trajtenberg 2005

2 Hedonic Price Function:  i - “Shadow Price” of characteristic i Hedonic Price Indices

3 Hedonic Price Function P Z (Mhz) P(z) Zenith IBMCompaq

4 Quality Adjusted Price Indexes P Z P 98 (z) P 99 (z) Quality-adjusted prices decrease

5 Prices, and Quality Adjusted Prices of Cars (in 1993 $)

6 P z U ‘ U P(z) Ford Model T Lowest-Priced model Before the Model T P(z) V Other: miss increased variety, etc. Limitations of Hedonic Indices

7 The Skill Content of Recent Technological Change: An Empirical Exploration Autor, Levy and Murnane, QJE, November 2003

8 The Skill Content – highlights What computers do: how computerization alters job skill demands. Computers (1) substitute for workers in performing cognitive and manual tasks that can be accomplished by following explicit rules; and (2) complement workers in performing non-routine problem-solving and complex communications tasks. If these tasks are imperfect substitutes, the model implies changes in the composition of job tasks; explore using data on task input for 1960 to 1998.

9 Skill content – cont. Find that within industries, occupations and education groups, computerization is associated with reduced labor input of routine manual and routine cognitive tasks, and increased labor input of non-routine cognitive tasks. Translating task shifts into education demand, the model can explain sixty percent of the estimated relative demand shift favoring college labor during 1970 to Task changes within nominally identical occupations account for almost half of this impact.

10 Tasks and computerization

11 Trends in Routine and Non-routine task input, Non-routine interactive Non-routine analytic

12 The impact of computer investment on tasks