Structural Transformation and the Rise of Information Technology

71 Pages Posted: 16 Oct 2017 Last revised: 19 Feb 2018

See all articles by Giovanni Gallipoli

Giovanni Gallipoli

Vancouver School of Economics, UBC; Centre for Economic Policy Research (CEPR); University of Chicago - Becker Friedman Institute for Economics

Christos Makridis

Stanford University; Columbia University - Columbia Business School; Arizona State University (ASU); Department of Veterans Affairs (VA)

Date Written: November 30, 2017

Abstract

Has the emergence of information technology changed the structure of employment and earnings in the US? We propose a new index of occupation-level IT intensity and document several long-term changes in the occupational landscape over the past decades. Using Census and US KLEMS micro-data, we show that: (i) the bulk of productivity growth after 1950 is concentrated in IT intensive sectors; (ii) the share of workers in IT jobs has expanded significantly, with little or no pause and IT jobs enjoy a large and growing earnings premium, even after controlling for general task requirements (e.g., cognitive, non-routine); and (iii) the rise of the IT intensive employment share is closely associated with declines in the manufacturing employment share. While earnings premia for college-educated and cognitive/non-routine workers have flattened in the aggregate since 2000, we show that they continued growing in IT intensive jobs and that these jobs have played a key role in accounting for the surge of high tech service labor productivity. We also use our IT intensity index to estimate industry-specific elasticities of substitution between IT and non-IT intensive labor, finding values of 1.6 in manufacturing and 1.3 in services. Finally, we revisit a long-standing question about the relationship between technological progress and productivity and provide evidence that occupation-level IT intensity is positively associated with output growth, especially in the services sector.

Keywords: information technology, productivity, skill premia, structural transformation

Suggested Citation

Gallipoli, Giovanni and Makridis, Christos, Structural Transformation and the Rise of Information Technology (November 30, 2017). Prepared for the Carnegie-Rochester-NYU Conference Series on Public Policy, 2017, Available at SSRN: https://ssrn.com/abstract=3053127 or http://dx.doi.org/10.2139/ssrn.3053127

Giovanni Gallipoli

Vancouver School of Economics, UBC ( email )

6000 Iona drive
Vancouver, BC BC V6T 1L4
Canada

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Chicago - Becker Friedman Institute for Economics ( email )

Chicago, IL 60637
United States

Christos Makridis (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Department of Veterans Affairs (VA) ( email )

810 Vermont Avenue NW
Washington, DC 20420
United States

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