Structural Transformation and the Rise of Information Technology

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

Giovanni Gallipoli

Vancouver School of Economics, UBC

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Government of the United States of America - Council of Economic Advisors

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

Christos Makridis (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Government of the United States of America - Council of Economic Advisors ( email )

Eisenhower Executive Office Building
17th and Pennsylvania Avenue, NW
Washington, DC 20502
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
66
rank
309,960
Abstract Views
395
PlumX