Economics of Innovation
Other Impact
Manuel Trajtenberg
2005
1
Hedonic Price Indices
Hedonic Price Function:
Pi    1Mhz i   2 RAMi  ...   m zim   i
i - “Shadow Price” of characteristic i
2
Hedonic Price Function
P
P(z)
IBM
Compaq
Zenith
Z (Mhz)
3
Quality Adjusted Price Indexes
P
P98(z)
P99(z)
Quality-adjusted
prices decrease
Z
4
Prices, and Quality Adjusted Prices
of Cars 1906-1940 (in 1993 $)
60,000
50,000
40,000
30,000
20,000
10,000
5
Price
QA Price
19
38
19
34
19
30
19
26
19
22
19
18
19
14
19
10
19
06
0
Limitations of Hedonic IndicesP(z)
P
Lowest-Priced model
Before the Model T
P(z)
6
U
U‘
V
Ford Model T
Other: miss increased variety, etc.
z
The Skill Content of Recent
Technological Change: An Empirical
Exploration
Autor, Levy and Murnane,
QJE, November 2003
7
The Skill Content – highlights
What computers do: how computerization alters
job skill demands. Computers (1) substitute for
workers in performing cognitive and manual tasks
that can be accomplished by following explicit
rules; and (2) complement workers in performing
non-routine problem-solving and complex
communications tasks.
If these tasks are imperfect substitutes, the model
implies changes in the composition of job tasks;
explore using data on task input for 1960 to 1998.
8
Skill content – cont.
Find that within industries, occupations and
education groups, computerization is associated
with reduced labor input of routine manual and
routine cognitive tasks, and increased labor
input of non-routine cognitive tasks.
Translating task shifts into education demand,
the model can explain sixty percent of the
estimated relative demand shift favoring college
labor during 1970 to 1998. Task changes within
nominally identical occupations account for
almost half of this impact.
9
Tasks and computerization
10
Trends in Routine and Non-routine task
input, 1960-1998
Non-routine
interactive
Non-routine
analytic
11
The impact of computer investment on tasks
12