This paper examines the link between information technology (IT) and the post-1995 U.S. productivity revival. Industry-level data show a broad productivity growth resurgence that reflects both the production and the use of IT. The most IT-intensive industries experienced significantly larger productivity gains than other industries and there is a strong link between IT capital shares and the relative acceleration of labor productivity. A novel decomposition shows that all of the direct contribution to the post-1995 productivity acceleration can be traced to the industries that either produce IT or use IT most intensively, with no net contribution from other industries that are relatively isolated from the IT revolution.

We explore the effect of computerization on productivity and output growth using data from 527 large US firms over 1987-1994. We find that computerization makes a contribution to measured productivity and output growth in the short term (using one year differences) that is consistent with normal returns to computer investments. However, the productivity and output contributions associated with computerization are up to five times greater over long periods (using five to seven year differences). The results suggest that the observed contribution of computerization is accompanied by relatively large and time-consuming investments in complementary inputs, such as organizational capital, that may be omitted in conventional calculations of productivity. The large long-run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s.

and two anonymous referees for helpful suggestions and Kevin Clisham for answering many technical questions about the ready-mixed concrete industry. I am also indebted to John Haltiwanger, Rachel Kranton, Mike Pries, Plutarchos Sakellaris, and John Shea for their instruction and guidance. Funding from a Brookings Research Fellowship is appreciatively acknowledged. The research in this paper was conducted while the author was a research associate at the Center for Economic Studies, U.S. Bureau of the Census. Research results and conclusions expressed are those of the

This paper advocates consistently defined units of account to measure the contributions of nature to human welfare. We argue that such units have to date not been defined by environmental accounting advocates and that the term “ecosystem services ” is too ad hoc to be of practical use in welfare accounting. We propose a definition, rooted in economic principles, of ecosystem service units. A goal of these units is comparability with the definition of conventional goods and services found in GDP and the other national accounts. We illustrate our definition of ecological units of account with concrete examples. We also argue that these same units of account provide an architecture for environmental performance measurement by governments, conservancies, and environmental markets.

Large fluctuations in energy prices have been a distinguishing characteristic of the U.S. economy since the 1970s. Turmoil in the Middle East, rising energy prices in the U.S. and evidence of global warming recently have reignited interest in the link between energy prices and economic performance. This paper addresses a number of the key issues in this debate: What are energy price shocks and where do they come from? How responsive is energy demand to changes in energy prices? How do consumers ’ expenditure patterns evolve in response to energy price shocks? How do energy price shocks affect real output, inflation, stock markets and the balance-of-payments? Why do energy price increases seem to cause recessions, but energy price decreases do not? Why has there been a surge in gasoline prices in recent years? Why has this new energy price shock not caused a recession so far? Have the effects of energy price shocks waned since the 1980s and, if so, why? As the paper demonstrates, it is critical to account for the endogeneity of energy prices and to differentiate between the effects of demand and supply shocks in energy markets, when answering these questions.

This paper estimates the effect of changing environmental standards on patterns of international investment. The analysis advances the existing literature in three ways. First, we avoid comparing different countries by examining foreign direct investment (FDI) to the U.S. and differences in pollution abatement costs among U.S. states. Data on environmental costs in U.S. states are more comparable than that for different countries, and U.S. states are more similar in other difficult-to-measure dimensions. Second, we account for differences in states' industrial compositions, an acknowledged problem for earlier studies. Third, we employ an 18-year panel of relative abatement costs, allowing us to control for unobserved state characteristics. We find robust evidence that pollution costs have had moderate deterrent effects on foreign investment.

The terrorist attacks during the past decade in London, Israel, the United States and elsewhere have spurned an interest in understanding not only how governments can mitigate terrorism risk but also how governments might help finance future losses. A burgeoning academic literature – and, not surprisingly, an intense lobbying effort by

By extrapolating Gordon's (1990) measures of the quality-bias in the ocial price indexes, we construct quality-adjusted price indexes for 24 types of equipment and software (E&S) from 1947 to 2000 and use them to measure technical change at the aggregate and at the industry level. Technological improvement in E&S accounts for an important fraction of postwar GDP growth and plays a key role in the productivity resurgence of the 1990s. Driving this finding is 4 percent annual growth in the quality of E&S in the postwar period and more than 6 percent annual growth in the 1990s. The acceleration in the 1990s occurred in every industry, consistent with the idea that information technology represents a general purpose technology.

Abstract: Under general conditions, linear decision rules of agents with rational expectations are equivalent to restricted error corrections. However, empirical rejections of rational expectation restrictions are the rule, rather than the exception, in macroeconomics. Rejections often are conditioned on the assumption that agents aim to smooth only the levels of actions or are subject to geometric random delays. Generalizations of dynamic frictions on agent activities are suggested that yield closed-form, higher-order decision rules with improved statistical fits and infrequent rejections of rational expectations restrictions. Properties of these generalized “rational ” error corrections are illustrated for producer pricing in maufacturing industries.

This paper examines the use of changing weight indexes of inputs and outputs in productivity measurement. 1 The U.S. Bureau of Labor Statistics (BLS) productivity measurement program has for many years preferred changing-weight indexes to fixed-weight indexes. The paper examines the reasons for this preference and how it has been implemented over time. The paper examines this broad problem as follows. The next section of the paper, section 1, discusses weighting schemes for input indexes, from the viewpoint of the general logic for selecting an input index method and also by drawing on the theoretical literature relating to input measurement. Section 2 treats output indexes in a parallel fashion. In both sections, it is concluded that changing-weight indexes are preferable to fixed-weight indexes. The third section explores several important practical issues that a statistical organization must resolve before implementing one of the changing-weight index forms and explores the tension between the ideal methods favored in the theoretical literature and the practical requirements of an on-going statistical program. This section also examines the issue of which output concept—for example, value added or gross output—is appropriate for industries and sectors of the economy. Section 4 describes how BLS has implemented its choice of changing-weight indexes for productivity data. Section 5 is an analysis of the effects of the BLS changingweight indexes on trends in selected input, output, and productivity series. The final section of this paper, section 6, summarizes the main results of the paper. It also offers a few observations on international comparisons of productivity trends. 1