Banani Nandi

Technical Change, Markup, Divestiture, and Productivity Growth in the U.S. Telecommunications Industry

This paper examines the sources of productivity growth for the, U.S. telecommunications industry from 1935 to 1987. These years encompass both the pre-and post-AT&T divestiture periods. We formulate a structural model that accounts for both changes in the cost and the demand side of the industry. We measure the contributions of aggregate demand, information intensity of the economy, price-cost margins, relative factor prices, direct and indirect effects of technological progress, and R&D investment on total-factor productivity (TFP) growth rate. We show that TFP growth rate as conventionally measured is a seriously biased measure of rate of technical change in this industry.

Benefits Of Communications Infrastructure Capital In U.S. Economy

In this paper we empirically estimate the contribution of the communications infrastructure to the growth of output and productivity at the dis-aggregate industry and at the aggregate economy levels. The estimated value of the marginal benefits or the shadow price of the communications infrastructure capital is positive in each of 34 industries representing the major industrial sectors of the U.S. economy. This effect captures network externality benefits and can be interpreted as a willingness to pay by each industry for communications infrastructure capital services over and above their direct payments for communications services. These results suggest that an increase in communications infrastructure capital services reduces cost in all the industries and as a consequence that of the entire economy. The relatively high value of estimated total marginal benefits for the aggregate economy indicates a high social rate of return to the investments in communications infrastructure.

Dynamic Aspects of US Telecommunications Productivity Measurement

Information and communications technology (ICT) is an important source of economic growth and productivity improvement. Both the theoretical and empirical literature suggests a positive impact from ICT equipment investment and service production on firm, industry and national productivity.1 Aggregate productivity growth is via improved interaction among advanced communications technology and computer hardware that leads to lower transaction costs. Such technological improvement enhances the speed and accuracy of analysis, storage and transmission of information. Also, improvement increases the availability of knowledge. This process necessarily generates spillover or network effects among firms (Katz and Shapiro 1985). In particular, recent analysis by (1999), 2003, (Mun and Nadiri 2002a, 2002b) and (2002) examine the role of the US ICT industry within the national economy.2 These studies focus on the computer equipment and software, and telecommunication industry market segments as a growth industry and their impact on the economy more generally. Their reported results are based on econometric model estimates using data from US industry. The sample data for analysis of US telecommunications industry total factor productivity (TFP) growth trends is for 1935 through 1987. For analyzing the impact of the telecommunications industry on other US industry, they use data from 34 sectors of the economy for 1950 to 1991. These data are annual price, output and input time-series for industries that comprise the major economic sectors. A flexible functional form, translog cost function is employed.