Précis
Where are computers most productive?
Children and labor supply
A new labor supply regime?
A new output variability regime?
Where are computers most productive?
Manufacturing industries that use computers most intensively benefit most from the computer revolution, according to a Conference Board economic research report by Robert H. McGuckin and Kevin J. Stiroh. A 17-percent drop per year in the price of computing power has led to a pervasive substitution of input toward computers across almost all sectors of the economy.
Eight sectors—five in manufacturing and three in services—have made especially intensive use of computers. In the factory sector, the heavy computer users (nonelectrical machinery; electrical machinery; printing and publishing; instruments; and stone, clay, and glass) showed average labor productivity growth rates of 5.7 percent per year in the 1990s, roughly double the average growth in productivity in manufacturing industries that had not computerized to the same degree. The computer-intensive industries in the service sector (trade; other services; and finance, insurance and real estate) showed no such productivity premium. In both computer-using and noncomputer-using industries among service producers, productivity increased at rates just under 1 percent per year from 1990 to 1996.
Analyzing the extremely complex decisions to bear children and to join the labor force have not been made easier by the fact that the two decisions are theoretically and empirically made jointly. Joshua D. Angrist and William N. Evans, writing in American Economic Review, attempt to work around this difficulty by examining the impact of what they describe as "plausibly exogenous sources of variation in family size," basically, additional children conceived to achieve a desired mix of sexes among the family’s children.
One of their conclusions confirms the usual finding that children tend to reduce the amount of labor supplied to the market by their mothers. More advanced econometric techniques tend to yield smaller, but still notable, estimates of this impact. More surprising to Angrist and Evans is that their more sophisticated estimates of the effects of children on labor supply are "much smaller and possibly even absent among college-educated women and women whose husbands have high wages." This, it seems, contradicts some theories of household time allocation.
Angrist and Evans found very little response to changes in family size in the labor market behavior of husbands: "In spite of the increase in women’s wages and labor force participation rates …, the labor market behavior of most married men appears to have remained largely insensitive to the number of children." Even in cases where more children led to more time spent by fathers caring for children, this was usually done at the expense of his leisure time rather than his work.
The usual litany of structural changes—globalization, deregulation, weakening labor unions, downsizing, and a greater sense of job insecurity—cause economists Barry Bluestone and Stephen Rose to suggest that there has been "a fundamental shift in the Nation’s labor supply regime." They hypothesize in a Jerome Levy Economics Institute Public Policy Brief that employers today do not have to raise wages to attract new workers into the labor supply because additional labor demand can be met by offering longer workweeks or moonlight jobs to existing employees.
They note that this is very different from the labor market of the 1970s in which additional workers had to be coaxed into the labor force. Historically, Bluestone and Rose assert, bringing a new worker into the labor market has required offering higher wages than those needed to encourage current workers to extend their working hours.
A new output variability regime?
A time series analysis of the quarter-to-quarter volatility of U.S. output suggests to Margaret M. McConnell and Gabriel Perez Quiros that there was a structural break in the volatility of gross domestic product (GDP) growth in the United States in the early 1980s. In technical terms, their Federal Reserve Bank of New York staff paper, Output Fluctuations in the United States: What Has Changed Since the Early 1980s?, shows "that a regime switching model of output growth fails to capture a business cycle signal [of the 1990–91 recession] when the model is augmented to allow both the mean and the variance of output to switch between States. To explain the absence of a business cycle signal, we appeal to the dominant effect of a one-time decline in the variance of GDP growth in the early 1980s…."
The authors go on to provide evidence that the structural break is related to a reduction in the variability of durable goods production and that the reduction in durables volatility corresponds to a decline in the share of durable goods production accounted for by inventories.
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