Mun S. Ho

A Retrospective Look at the U.S. Productivity Growth Resurgence

It is now widely recognized that information technology (IT) was critical to the dramatic acceleration of U.S. labor productivity growth in the mid-1990s. This paper traces the evolution of productivity estimates to document how and when this perception emerged. Early studies concluded that IT was relatively unimportant. It was only after the massive IT investment boom of the late 1990s that this investment and underlying productivity increases in the IT-producing sectors were identified as important sources of growth. Although IT has diminished in significance since the dot-com crash of 2000, we project that private sector productivity growth will average around 2.5 percent per year for the next decade, a pace that is only moderately below the average for the 1995-2005 period.

Growth of US Industries and Investments in Information Technology and Higher Education

This paper presents new data on the sources of growth for the US economy over the period 1977-2000. Our principal innovation is the incorporation of detailed information for individual industries, including those involved in the production of information technology equipment and software. We show that economic growth is dominated by investments in information technology and higher education, both for individual industries and the economy as a whole. We also show that a jump in information technology investment, gains in the employment of college-educated workers, and the revival of productivity growth account for the resurgence of the US economy since 1995.

Projecting Productivity Growth: Lessons from the U.S. Growth Resurgence

This paper analyzes the sources of U.S. labor productivity growth in the post-1995 period and presents projections for both output and labor productivity growth for the next decade. Despite the recent downward revisions to U.S. GDP and software investment, we show that information technology (IT) played a substantial role in the U.S. productivity revival. We then outline a methodology for projecting trend output and productivity growth. Our base-case projection puts the rate of trend productivity growth at 2.21% per year over the next decade with a range of 1.33 - 2.92%, reflecting fundamental uncertainties about the rate of technological progress in IT-production and investment patterns. Our central projection is only slightly below the average growth rate of 2.36% during the 1995-2000 period.

Finding Cointegration Rank in High Dimensional Systems Using the Johansen Test: An Illustration Using Data Based Monte Carlo Simulations

The authors examine the ability of the Johansen (1991) test to estimate the number of unit roots in high dimensional systems. They use data based Monte Carlo methods as a simple means of evaluating the validity of inference using asymptotic critical values. These simulations for a typical annual post-World War II dataset illustrate how the estimated number of unit roots change in a nonmonotone fashion with the dimension of the system, and with the number of lags in the VAR representation. The authors find that overparametrization in high dimensions is as bad as underparametrization. The Bayes information criteria outperforms the Akaike information criteria in their setup. Copyright 1996 by MIT Press.

China's 11th Five-Year Plan and the Environment: Reducing SO2 Emissions

Chinas rapid economic growth has been accompanied by a high level of environmental degradation. One of the major sources of health and ecosystem damages is sulfur dioxide (SO2). Reducing SO2 emissions is a priority of Chinas environmental authorities, and the 11th Five-Year Plan (2006–2010) includes the target of reducing total SO2 emissions by 10 percent from the 2005 level. Given the rapid increase in SO2 emissions that is expected to occur in absence of intervention, attaining this target will require a significant effort. This article examines the two major policy measures the government is taking to achieve the SO2 target: a shutdown of many small, inefficient power plants and the installation of desulfurization equipment on existing and new coal-fired plants. We present results from a joint U.S.–China study that we participated in, which estimated the costs and benefits of these policies. We then estimate the economy-wide impacts of the two policies using a multisector model of the Chinese economy. We find that in the aggregate, the economic benefits of the shutdown of the small power plants are large enough to offset the costs of the desulfurization equipment, even without considering the substantial environmental benefits from the reduction of emissions of SO2 and other pollutants.

Impact of Carbon Price Policies on U.S. Industry

This paper informs the discussion of carbon price policies by examining the potential for adverse impacts on domestic industries, with a focus on detailed sector-level analysis. The assumed policy scenario involves a unilateral economy-wide

Lessons from the US growth resurgence

10/ton CO2 charge without accompanying border tax adjustments or other complementary policies. Four modeling approaches are developed as a proxy for the different time horizons over which firms can pass through added costs, change input mix, adopt new technologies, and reallocate capital. Overall, we find that a readily identifiable set of industries experience particularly adverse impacts as measured by reduced output and that the relative burdens on different industries are remarkably consistent across the four time horizons. Output rebounds considerably over longer time horizons, and the adverse impacts on profits diminish even more rapidly in most cases. Over the short term employment losses mirror output declines, while gains in other industries fully offset the losses over the longer horizons. At the same time, leakage abroad is considerable in some sectors, particularly when reductions in exports are considered.

Potential Growth of the U.S. Economy: Will the Productivity Resurgence Continue?

The unusual combination of more rapid growth and lower inflation in the United States from 1995 to 2000 touched off a strenuous debate among economists about whether improvements in US economic performance could be sustained. Despite the recent slowdown in the economy in general and in information technology (IT) in particular, this debate has given way to a broad consensus that IT is the key to understanding the American growth resurgence and recent research has turned to the future of productivity growth. In this paper we review the most recent evidence on growth in the United States and present a model for projecting future productivity growth. Our primary conclusion is that, despite downward revisions to the gross domestic product (GDP) and investment in the annual revisions of the US National Income and Product Accounts (NIPA) in July of 2001 and 2002, the US productivity revival remains intact with IT as the predominant source. The story begins with an increase in total factor productivity (TFP) growth in the IT-producing sectors (computer hardware, software, and telecommunications), which led to falling relative prices and induced capital deepening in IT equipment. These two contributions account for a majority of the acceleration in labor productivity growth after 1995.

A Continuous-Time Arbitrage-Pricing Model With Stochastic Volatility and Jumps

This paper analyzes the sources of U.S. productivity growth through 2004 and presents medium-term projections for the U.S. economy. We attribute a substantial portion of productivity gains over the past decade to production and use of information technology equipment and software. In the most recent years, we also identify a growing contribution from sources outside the technology-producing sectors. Our base-case projection for the GDP growth rate is almost exactly three percent. We emphasize the substantial range of uncertainty by presenting an optimistic projection of 3.5 percent and a pessimistic projection of only 1.9 percent.

The near-term impacts of carbon mitigation policies on manufacturing industries

The authors formulate and test a continuous time asset pricing model using U.S. equity market data. They assume that stock returns are driven by common factors including random jump-size Poisson processes and Brownian motions with stochastic volatility. The model places over-identifying restrictions on the mean returns allowing one to identify risk neutral probability distributions useful in pricing derivative securities. The authors test for the restrictions and decompose moments of the asset returns into the contributions made by different factors. Their econometric methods take full account of time aggregation.