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.

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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.


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