The Productivity J-Curve: How Intangibles Complement General Purpose Technologies

42 Pages Posted: 5 Mar 2019

See all articles by Erik Brynjolfsson

Erik Brynjolfsson

National Bureau of Economic Research (NBER); Stanford

Daniel Rock

University of Pennsylvania - Operations & Information Management Department

Chad Syverson

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 4, 2019

Abstract

General purpose technologies (GPTs) such as AI enable and require significant complementary investments, including business process redesign, co-invention of new products and business models, and investments in human capital. These complementary investments are often intangible and poorly measured in the national accounts, even if they create valuable assets for the firm. We develop a model that shows how this leads to an underestimation of output and productivity in the early years of a new GPT, and how later, when the benefits of intangible investments are harvested, productivity will be overestimated. Our model generates a Productivity J-Curve that can explain the productivity slowdowns often accompanying the advent of GPTs, as well as the follow-on increase in productivity later. We use our model to assess how AI-related intangible capital is currently affecting measured total factor productivity (TFP) and output. We also conduct a historical analysis of the roles of intangibles tied to R&D, software, and computer hardware, finding substantial and ongoing effects of software in particular and hardware to a lesser extent.

Suggested Citation

Brynjolfsson, Erik and Rock, Daniel and Syverson, Chad, The Productivity J-Curve: How Intangibles Complement General Purpose Technologies (March 4, 2019). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-33, Available at SSRN: https://ssrn.com/abstract=3346739 or http://dx.doi.org/10.2139/ssrn.3346739

Erik Brynjolfsson

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stanford ( email )

366 Galvez St
Stanford, CA 94305
United States

HOME PAGE: http://brynjolfsson.com

Daniel Rock

University of Pennsylvania - Operations & Information Management Department ( email )

Philadelphia, PA 19104
United States

Chad Syverson (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
300
Abstract Views
1,614
rank
112,801
PlumX Metrics