Structural Transformation and the Rise of Information Technology

We use a task-based IT intensity index to: (1) document the evolution of earnings, employment, and productivity in low and high tech industries; (2) estimate the elasticity of substitution in production between IT and non-IT jobs; (3) revisit Solow’s Paradox, finding evidence of positive occupation-level effects of IT intensity on productivity growth.

The Journal of Monetary Economics, Vol.97, 91-110, 2018 (Carnegie Rochester NYU Series on Public Policy)

With
Christos A. Makridis

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.

DRAFT (PDF)
Online Appendix (PDF)

DATA and CODE

Citation

@article{gallipoli_makridis_2018_structural_transformation,
 title={Structural Transformation and the Rise of Information Technology},
 author={Gallipoli, Giovanni and Makridis, Christos A.},
 journal={Journal of Monetary Economics},
 year={2018},
 month={August},
 note = {Carnegie Rochester NYU Series on Public Policy}
}