Measuring the Welfare Gain from Personal Computers

Economie d'avant garde Research Report No. 15

36 Pages Posted: 19 Sep 2007 Last revised: 1 Jul 2011

See all articles by Jeremy Greenwood

Jeremy Greenwood

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Karen A. Kopecky

Federal Reserve Bank of Atlanta; University of Western Ontario - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: June 30, 2011

Abstract

The welfare gain to consumers from the introduction of personal computers is estimated here. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero. This implies that the good won't be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated/estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is in the range of 2 to 3 percent of consumption expenditure.

Keywords: Compensating Variation, Computers, Electricity, Equivalent Variation, Fisher Ideal Price Index, New Goods, Technological Progress, Tornqvist Price Index, Welfare Gain

JEL Classification: E01, E21, O33

Suggested Citation

Greenwood, Jeremy and Kopecky, Karen A., Measuring the Welfare Gain from Personal Computers (June 30, 2011). Economie d'avant garde Research Report No. 15. Available at SSRN: https://ssrn.com/abstract=1014921 or http://dx.doi.org/10.2139/ssrn.1014921

Jeremy Greenwood (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
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Philadelphia, PA 19104-6297
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215-898-1505 (Phone)

HOME PAGE: http://jeremygreenwood.net

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Karen A. Kopecky

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada
519-661-2111, ext. 80446 (Phone)
519-661-3666 (Fax)

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