1. Information Technology and the World Economy
Article Analysis By
Angel Garbarino

2. By: Dale W. Jorgenson Harvard University & Khuong Vu 2005
Jorgenson, Dale W., and Khuong Vu, “Information Technology and the World Economy,” Scandinavian Journal of Economics 107(4), 2005:
By: Dale W. Jorgenson
Harvard University
&
Khuong Vu
2005
9/18/2018

3. The Question?
Analyze: The impact of investment in information technology (IT) equipment and software on the recent resurgence in world economic growth.
9/18/2018

4. Data World= Regions 1. 7 Regions Economies 2. G7 3. GD7
NOTE: World (110) Economies= the 7 regions
9/18/2018

5. G7 = Canada, France, Germany, Italy, Japan, the UK, and U.S.
7 REGIONS = Industrialized G7, non-G7, Developing Asia, Latin America, Eastern Europe and the Former Soviet Union, North Africa and the Middle East, and Sub-Saharan Africa.
G7 = Canada, France, Germany, Italy, Japan, the UK, and U.S.
GD7= Brazil, China, India, Indonesia, Mexico, Russian Federation, South Korea.
9/18/2018

6. World Economies= 110 with > mill. In pop.
Complete set of national accounts for
=96% of world output
Source: Penn World Table and World Bank Development Indicators (2004)
9/18/2018

7. -Double Digit IT investment growth after 1995 in G7
During
Break up into 2 periods
Why?
-Double Digit IT investment growth after 1995 in G7
- Rate of Prices
- Semiconductors years
9/18/2018

8. Method
Allocated growth of world output between input growth and productivity
1.GDP growth to GDP share and Growth share vs
2.Sources of output growth
Capital (ICT, non-ICT)
Labor (Hrs, quality)
TFP
3. Levels of output & input per capita and production
1989, 1995, 2003
Output, Input, Productivity
9/18/2018

9. 9/18/2018

10. 9/18/2018

11. Table 1~ Some points G7 <50% of world product 1989-2003
More Sources for data used:
OECD (2002), Ark et al (2003, updated 2005), Jorgenson and Mothohasi (2005), Penn World Table (2002) and Young (2003).
G7 <50% of world product
U.S. 21.8% world product
and 48.2% of G7
U.S growth rate from 2.43% to 3.56%
9/18/2018

12. 9/18/2018

13. 9/18/2018

14. Table 2~ Some Points National accounting data for labor and capital
More Sources for Data used:
Barro and Lee (2001) Kaufmann et al. (2004), the World Bank, and the Bureau of Economic Analysis (BEA).
National accounting data for labor and capital
IT = IT capital inputs / output
Same for non-IT
Labor Quality= labor input /
hrs. worked
Productivity = output –
(capital + labor inputs)
=Growth rate or ‘change in’
ICT= Information Communication Technology, here also = IT
9/18/2018

15. 9/18/2018

16. Table 3~ Some Points Productivity= input/output U.S. =100 in 2000
Output gap between U.S. & G7 since 1995
Developing Asia, output PC
6 in 1989
8.5 in 1995
12.1 in 2003
9/18/2018

17. What has been the impact of IT investment since 1995 on world economic growth?
“Our most astonishing finding is that input growth greatly predominates.”
9/18/2018

18. GDP GROWTH Developing Asia 60% prior and 40% after
China responsible for 50%
Eastern Europe and former Soviet Union during socialism transition, completely recovered
9/18/2018

19. IT GROWTH IT investment most important source of growth
But, non-IT investments dominated
Labor input next
Before, quality
After, hours worked
Productivity, least important
Except for Asian Miracle < 1995
9/18/2018

20. Regions: A closer look G7: IT investment
In non-G7, Latin America, eastern Europe, Sub-Saharan Africa, and North Africa and Middle East:
Labor input
Productivity stagnant or in Latin America, Eastern Europe, Sub-Saharan Africa, and North Africa and the Middle East.
9/18/2018

21. Impact of IT investment
All 7 regions in IT investment > 1995
Most significant on growth in G7
#1 U.S.
Nxt. Developing Asia
China
Role of IT investment >1995 doubled for:
Latin America, Eastern Europe, North Africa and Middle East, and Sub-Saharan Africa.
9/18/2018

22. Policy IT investment has been crucial to U.S economic growth,
How has it been to others?
A better understanding on the role of IT investment in global economic growth
Future policy regarding IT investment
This will help Angel on her Research Paper
9/18/2018

23. Evaluation Interesting question (+) Read, Difficult to (-)
Ex: Never defined non-G7
Ex: introduced definitions in tables “GD7”
9/18/2018

24. Ex: Only includes IT investment on software and equipment
Never addressed counterarguments or the scope of their analysis (-)
Ex: That ICT had other growth spurts during in , not included in “resurgence”
Ex: Only includes IT investment on software and equipment
9/18/2018

25. Interesting approach (+)
Ex: breaking down Capital into ICT and non-ICT
Hard to analyze, use other’s data (-)
Ex: How did they derive theirs?
Language?
Ex: …that input growth greatly predominates! (Abstract, +2x)
9/18/2018

26. All is subject to Change
How?
1. Literature Survey: On Information Technology Prices and Economic Growth
Issues:
IT boom since 1990s
theory
Price relative to other factors (infrastructure, government policies, trade liberalization)
Price changes experienced differently throughout the world
All is subject to Change
9/18/2018