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Numbers in the text and tables may not add up to totals because of rounding. The cover photo of an Intel Pentium 4 microprocessor appears courtesy of Intel Corporation. |
Semiconductor and computer makers achieved remarkable productivity gains in the late 1990s, providing increasingly capable computers to businesses and consumers at ever lower prices. That manufacturing performance was so exceptional that it boosted the growth of national productivity substantially. Looking forward, many observers wonder whether the semiconductor and computer industries will continue to help productivity increase as rapidly as they have in the recent past. This Congressional Budget Office (CBO) paper--prepared at the request of the Senate Budget Committee--reviews the recent productivity growth in the economy, its relationship to improvements in computer technology, and the prospects for such growth and improvements in the future. In keeping with CBO's mandate to provide objective, impartial analysis, this report makes no recommendations.
Nathan Musick and Philip Webre of CBO's Microeconomic and Financial Studies Division prepared the paper under the supervision of Roger Hitchner and David Moore. The paper benefited from comments from Ana Aizcorbe and Dan Sichel of the Board of Governors of the Federal Reserve System, Robert Doering of Texas Instruments, Dale Jorgenson of Harvard University, and Jack Triplett of the Brookings Institution. Within CBO, Bob Arnold, Arlene Holen, Kim Kowalewski, Deborah Lucas, and John Peterson provided useful comments. Bob Arnold also provided productivity estimates. Kathryn Winstead helped with the figures.
John Skeen edited the manuscript, and Christine Bogusz proofread it.
Angela Z. McCollough prepared the paper for publication, and Annette Kalicki
produced the electronic versions for CBO's Web site (www.cbo.gov).
Dan L. Crippen
Director
May 2002
II - MEASURING POTENTIAL TOTAL FACTOR PRODUCTIVITY
III - PRICES OF COMPUTERS AND COMPONENTS
IV - THE TECHNOLOGICAL OUTLOOK AND ITS IMPLICATIONS FOR THE NEXT DECADE
APPENDIX A: HEDONIC PRICE ESTIMATION
TABLES | |
S-1. | Contributions to Potential Total Factor Productivity Growth in the Nonfarm Business Sector, 1951-2012 |
1-1. | Contributions to Potential Growth in the Nonfarm Business Sector, 1951-2012 |
2-1. | Percentage Changes in the Price and Quantity of Private Fixed Investment in Computers and Peripheral Hardware, 1991-2000 |
2-2. | Nominal Share of Computers and Peripheral Equipment in Gross Domestic Product, 1991-2000 |
2-3. | The Computer Hardware Sector's and Other Sectors' Contributions to the Recent Acceleration of Total Factor Productivity Growth |
3-1. | Price Declines for Computer Components Compared with Those for Complete Computer Systems, 1995-2000 |
4-1. | Effects of Different Paths for Computer Prices on Total Factor Productivity, 2002-2012 |
FIGURES | |
3-1. | Prices for Dynamic Random Access Memory, 1978-2000 |
4-1. | Wholesale Prices for Disk Drives, 1980-2000 |
BOXES | |
4-1. | Technological Challenges in Fabricating Integrated Circuits |
A-1. | An Example of Hedonic Price Estimation in the Producer Price Index |