1. A PROTOTYPE INDUSTRY-LEVEL PRODUCTION ACCOUNT FOR THE UNITED STATES, 1947-2010 Dale Jorgenson, Mun Ho, Jon Samuels Harvard University Asia KLEMS 2012 Data management workshop Seoul National University, 5-6 July 2012

2. The Economist May 26 2012 “Humbler horizons” Has the crisis permanently dented America’s productive capacity? “The Effect of Financial Crises on Potential Output. New Empirical Evidence from OECD Countries", Furceri and Mourougane (2009) OECD. "What's the damage? Medium term output dynamics after financial crises", World Economic Outlook, IMF, 2009 Need productivity data to answer such questions: Is ICT's Contribution to Productivity Growth Peaking? Van Ark and Fosler (2007), Conference Board Race Against The Machine. Brynjolfsson and McAfee (2011). Is rapid technological change generating labour market problems?

3. Topics: 1.History of U.S. productivity data development 2.Methodology. Accounting for IT 3.Our new data 4.Postwar U.S. economic history, 1947-2010 Postwar Recovery, the Big Slump, the Information Age 5. Econometrics; projecting economic growth

4. Historical Background of US Accounts Benchmark Input-Output Tables for the U.S. 1947, 1958, 1963, 1967,72,77,82,87,92 in SIC 1997, 2002 in NAICS (426 industries) Annual Input-Output Tables from BEA 1998-2010 on a Continuously Revised Basis (65 NAICS industries) NEW! 1947-1997 annual IO tables (65 ind.) KLEMS from BEA 1997-2010 (65 industries)

5. Historical Background; cont. Annual Input-Output Tables from BLS 1977-95; 1983-2000; 1993-2010 (~200 ind) Prices from BEA and BLS Prices from BEA to deflate their KLEMS series Import prices on NAICS basis 2006+

6. Jorgenson, Gollop and Fraumeni (1987) 51 SIC industries, 1948-1979 Jorgenson, Ho and Stiroh (2005) 44 SIC industries (ICT focused),1977-2000 Mas & Stehrer, eds. (2012): Jorgenson, Ho and Samuels 70 NAICS indus. (ICT focused),1960-2007 Unofficial version of historical NAICS.

7. Methodology

8. IT in the economic accounts Final output: GDP = C + I(IT) + I(nonIT) + G + X – M Industry output: Q j j=computers, semicond., software, … Inputs (KLEMS): K(IT), K(nonIT) [L(IT skill), L(nonIT)] Income (value added): GDP = VL + VK(IT) + VK(nonIT) + tax

9. Methodology Common approach uses an aggregate production function to define TFP growth for GDP (Value Added): We aggregate over industries without imposing strong assumptions. Industry gross output is function of value added (V) and intermediate input (X): GDP from production possibility frontier; aggregating over V j :

10. Methodology, cont. Aggregate TFP growth is then: This is related to industry TFP,, using “Domar weights”, and factor reallocation terms:

11. Methodology, cont. We have 87 industries, and find it useful to group them using a IT-intensity index (III) into: -IT producing -IT-intensive using -Non IT-intensive using

12. What’s new in this study -Data for 65 (87) industries, 1947-2010 -NAICS (North American Industry Classif. System) providing more detail for IT sectors -historical IO data in NAICS from BEA. -investment data in NAICS from BEA -historical labor data in NAICS from us -historical output prices in NAICS from us Details of data construction in Appendix

13. What’s new in this study -Definition of the IT-intensity index (III) for classifying industries now includes intermediate IT inputs, : * previously: * now:

14. Classification of Industries (IT share 2005)

17. Postwar U.S. Economic History

18. ROLE OF INFORMATION TECHNOLOGY Growth of Value Added and Productivity Contribution by industry to the growth of aggregate value added:

21. Industry Contributions to Value Added Growth; 1947- 2010

22. Total Factor Productivity For industry j and IT-groups: Aggregate Productivity Growth Industry Productivity and Factor Reallocations ROLE OF TOTAL FACTOR PRODUCTIVITY

25. Contributions of Individual Industries to Productivity Growth, 1947-2010

26. Industry Contributions to Aggregate TFP Growth, 1947-2010

27. SOURCES OF U.S. ECONOMIC GROWTH Contribution of Capital Input IT and Non-IT Capital Contribution of Labor Input College educated and Non-college Contribution of Productivity Replication vs. Innovation

30. Capital input growth, 1947-2010

31. Labor input growth, 1947-2010

32. Energy industries in U.S. economic growth

33. Role of Energy Sectors

35. PROJECTING TECHNOLOGY AND ECONOMIC GROWTH Substitution versus Technical Change Substitution among Inputs Capital, Labor, Energy, and Materials Biases of Technical Change Capital, Labor, Energy, and Materials Rate of Technical Change Autonomous and Induced Technical Change

36. Industry Cost function i,k={K,L,E,M} In vector form, the input share eq. and transition eq.:

41. A PROTOTYPE INDUSTRY-LEVEL PRODUCTION ACCOUNT FOR THE UNITED STATES, 1947-2010 Summary and Conclusions Sources of U.S. Economic Growth Replication versus Innovation Postwar U.S. Economic History The Postwar Recovery, the Big Slump and the Great Recession Projecting Technology and Economic Growth Substitution versus Technical Change