Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach

Federal Reserve Bank of Atlanta Working Paper No. 2011-05

26 Pages Posted: 4 Apr 2011

See all articles by Karen A. Kopecky

Karen A. Kopecky

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

Jeremy Greenwood

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

Date Written: March 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, implying 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 and estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is in the range of 2 percent to 3 percent of consumption expenditure.

Keywords: compensating variation, computers, electricity, equivalent variation, technological progress, Tornqvist price index, welfare gain

JEL Classification: E01, E21, O33, O47

Suggested Citation

Kopecky, Karen A. and Greenwood, Jeremy, Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach (March 2011). Federal Reserve Bank of Atlanta Working Paper No. 2011-05. Available at SSRN: https://ssrn.com/abstract=1800266 or http://dx.doi.org/10.2139/ssrn.1800266

Karen A. Kopecky (Contact Author)

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)

Jeremy Greenwood

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-1505 (Phone)

HOME PAGE: http://jeremygreenwood.net

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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