Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" DRAFT Semiconductors and U.S. Economic Growth∗ Jon D. Samuels Department of Economics IQSS and Johns Hopkins University Harvard University April 1, 2012 Abstract Semiconductor technology is widely credited with driving the evolution of information technology, yet the device’s use as an intermediate input by many sectors of the economy makes its economic impact difficult to quantify. I use the prototype NAICSbased industry production account data of Jorgenson et al. (2011) and the weighting scheme of Domar (1961) to measure the direct impact of semiconductor production on aggregate growth and productivity, and the contribution of semiconductors via industries that use these devices as intermediate input. Using total factor productivity as a measure of innovation, I find that over the 1960-2007 period, innovation in the Semiconductor industry grew close to 9% per year, twenty five times the innovation growth rate for the economy as a whole, and accounted for close to 30% of aggregate economic innovation. By sector, semiconductor deepening accounted for 37% of the growth in labor productivity in the Communications Equipment industry, 25% of the growth of the Other Electronic Products industry, 14% of Educational Services, and 9% of labor productivity growth in the Computer and Peripheral Equipment industry for the period. More recent data on prices through 2009 suggests that innovation in semiconductors remained strong in 2008, but slipped a bit in 2009 amidst the financial crisis. DRAFT ∗ As the Robert M. Burger Fellow, I gratefully acknowledge financial support from the Semiconductor Research Corporation, along with support from Celia Merzbacher and Ginny Wiggins at SRC and Daryl Hatano of SIA. I thank my academic advisor at JHU, Jon Faust. I am indebted to Dale Jorgenson for introducing me to the world of growth accounting, encouraging me to apply for the Burger Fellowship, and supporting me during the writing of this report. I thank Mun Ho for comments and suggestions. 1 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" 1 Introduction Since Robert Solow’s statement in 1987 of the productivity paradox as “You can see the computer age everywhere but in the productivity statistics,” a substantial body of research has emerged devoted to measuring the impact of Information Technology on economic growth in the U.S. and the world economy. As a result of this research, consensus has emerged on the importance of Information Technology as a driving force of economic growth across the world, and key links have been made between IT and the productivity statistics. The economic boom in the U.S. from 1995-2000 is now generally accepted as being led by the production of, and investment in, Information Technology capital goods and new research suggests the importance of information technology as an impetus for innovation in industries that make intensive use of IT.1 Jorgenson (2001) traces the IT-boom of 1995-2000 to a change in the product cycle of the Semiconductor industry, while Jorgenson et al. (2007) measures the contribution of IT-producing industries to aggregate productivity growth. While these studies do identify the role of the Semiconductor industry in measured aggregate economic growth and productivity, they do not present estimates of the contribution of semiconductors to industries that use these devices as inputs. In this study, using a prototype NAICS-based industry DRAFT production account that includes estimates of how all industries in the U.S. economy combine to produce aggregate output, I not only identify the role of semiconductors in aggregate economic growth and productivity, but also the contribution of semiconductors to the production of all industries that make use of these devices in their production processes. Innovation within the Semiconductor industry has had far reaching technological and economic implications. The semiconductor industry is a conglomerate of producers of logic and memory chips that are the backbone of modern computing, makers of complex system on a chip (SoC) devices embedded in other electronic products such as cell phones and digital cameras, semiconductor equipment manufactures, and manufactures of semiconductor material itself. The chain of production of many chip producers has evolved over time; now, many semiconductor chip companies in the U.S. are fabless, that is, the companies outsource the actual production of the semiconductor hardware to focus on design and sales. The objective of this study is to measure the economic impact of the industry in the U.S. as a whole. The output of the Semiconductor industry in the economic accounting described below includes all of the establishments located in the U.S. in one industry, and the framework allows the researcher to trace this output, and that imported from international producers, through to purchasing 1 See Jorgenson et al. (2005) and Jorgenson et al. (forthcoming). 2 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" industries in the U.S. that use semiconductors as intermediate input. A long history of research, conceptual, methodological, and empirical, on economic measurement has produced a widely accepted tool kit that allows researchers to analyze the foundations of economic growth by decomposing aggregate growth into its sources across industries, inputs used by industries to produce output, and economic innovation that measures the state of technology that producers use, and how it evolves over time. This tool kit, which originated with Solow’s aggregate production function in Solow (1957), was replaced with the new framework for analyzing the sources of growth developed by Jorgenson and Griliches (1967) and Jorgenson et al. (1987), and shown to be the “killer application” for analyzing the impact of information technology on growth and productivity by Jorgenson et al. (2005).2 A primary motivation for the new framework is to measure the role of innovation in the economy and its origins across industries. Since innovation itself is unobservable, the framework uses economic theory to arrive at estimates of innovation and how it has evolved over time. It turns out that by using economic theory, one need not pin down the entire production technology used by the agents in the economy, but one needs measure of the quantities of outputs and inputs used by industries over time, and their respective prices. Thus, the new framework requires considerable effort to develop a DRAFT set of economic accounts that properly captures the economic outputs of industries and how industries use different inputs to produce that output. Furthermore, in order to relate to officially reported economic growth of the aggregate economy, the measures must be based on standards of national income accounting, and internally consistent with those measures. The importance of innovation in abstract is intuitive. In a speech by Fed Chairman Ben Bernanke (Bernanke (2011))3 : Innovation has not only led to new products and more-efficient production methods, but it has also induced dramatic changes in how businesses are organized and managed, highlighting the connections between new ideas and methods and the organizational structure needed to implement them. For example, in the 19th century, the development of the railroad and telegraph, along with a host of other technologies, were associated with the rise of large businesses with national reach. And, as transportation and communication technologies developed further in the 20th century, multinational corporations became more feasible and prevalent. This paper intends to quantify the role of innovation in growth and the Semiconductor 2 3 Approach dubbed the “Killer application” by Jorgenson and Wessner (2004). Available http://www.federalreserve.gov/newsevents/speech/bernanke20110516a.htm 3 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" industry’s primary role in the evolution of technology over time. One key feature of the growth accounting framework is that aggregate economic growth is decomposable to its sources across and within industries that make up the aggregate economy. Industries produce output using inputs produced by other sectors of the economy in addition to primary inputs, capital and labor, and according to the prevailing level of technology. Aggregate growth depends on the quantity of output each industry produces, and how industries use inputs produced by other sectors, primary inputs, and the level of technology. In contrast to other methods that give indicators of innovation and resource accumulation, as in World Information Technology and Services Alliance (2010) or National Science Foundation (2010), this framework gives internally consistent measures that aggregate to economic growth and productivity for the whole U.S. economy. This allows for a direct comparison and analysis from a top-down or bottom-up perspective of how different industries and their interactions produce innovation and growth. An important element of the new framework is that economic output and input is measured in constant-quality units. The importance of this can be seen by simple example; if we are measuring the quantity of goods produced over time, we need to adjust the current vintage of product to be comparable with earlier vintages. An easy DRAFT to grasp case for the need for quality adjustment is IT-goods whose characteristics are changing rapidly over time, for example, a computer whose processing power, hard disk, and memory has doubled but the components are housed in the same single unit. The economic output of the computer producer has, essentially, doubled, hence the quantity of output doubles in constant quality terms, and in the case where the unit price is fixed over time, the constant quality price of computers falls by 50 percent.4 An important feature of the new framework is when outputs are also used as inputs, both the input and output price reflect the quality-adjusted quantity produced and used, i.e. both sides of the account are adjusted for quality. When economic outputs, and the corresponding inputs used to produce the outputs, are properly adjusted for quality and composition, the change in output not accounted for by the change in inputs yields a primary measure of economic innovation, namely total factor productivity. In an accounting sense, total factor productivity is a residual defined as the growth rate of output less the growth rate of input; in an economic sense total factor productivity measures the level of technology in the economy and how it evolves over time. Changes in innovation are captured as changes in technology 4 Typically, constant quality prices are produced with hedonic or matched model methods. Wasshausen and Moulton (2006) describes the current implementation in the national accounts. Quality adjustment is an ongoing area of research since outputs like services are notoriously difficult to measure in constant quality units. 4 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" because either more output can be produced with existing levels of input, which is clearly innovation, or higher quality output can be produced with the current level of input, also clearly innovation. Dredging up the computer example again, if the same resources produced the same number of computers in consecutive years, but the latter year’s computers were twice as fast, this technological improvement is accounted for in the constant quality output, and since the resources employed are fixed in this example, this innovation is measured as total factor productivity. The total factor productivity measure of innovation has been endorsed the Advisory Committee on Measuring Innovation in the 21st Century (Schramm et al. (2008)) made up of a select group of members from the business and academic community. The Committee recommends: Developing annual industry level of total factor productivity by restructuring the NIPAs to create a more complete and consistent set of accounts integrated with data generated by other statistical agencies to allow for the consistent estimation of the contribution of innovation to economic growth. This paper outlines the construction of just such a data set and uses the data to analyze the sources of growth and innovation from 1960-2007 in the U.S. DRAFT The goal of this paper is to measure the contribution of Semiconductors to economic growth using the growth accounting tool kit. The Semiconductor industry has two defining characteristics that makes the new framework for analyzing productivity salient; first, the lion share of semiconductor output is sold as intermediate input, so the framework is able to capture how industries make use of this input in production, and second, semiconductors and products derived from them have rapidly changing product quality. I measure the contribution of the Semiconductor industry to aggregate growth and productivity, and its contribution to industries that use semiconductors as an input to their production processes. A key feature of the methodology below is that it is internally consistent, so measure of output flowing from one industry are consistent with the inputs used by other industries, and consistent with official measures of national output and income, so that direct comparisons can be made across industries and industry contributions aggregate to the economy as a whole. The paper is organized as follows. Section 2 details the methodological approach of growth accounting. Section 3 details the construction of the prototype NAICS-based production account for 1960-2007 to match the concepts in the growth accounting framework. Section 4 uses the framework to measure the contribution of semiconductors to the output growth of other industries in the economy, while Section 5 details the Semiconductor industry’s contribution to aggregate growth and productivity. Section 6 presents a back of the envelope calculation on the productivity performance of the 5 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Semiconductor industry during the 2007-2009 period, and Section 7 concludes. 2 Growth Accounting: A primer This section reviews the growth accounting tool kit and its foundations. The economy as a whole is modeled as a panoptic collection of industries. Individual industries produce output over time by accumulating and employing more resources, and by innovating to produce higher quality output or to employ current resources more efficiently. The first part of this section shows how each of these industries’ growth over time can be decomposed into accumulation of inputs used in production and innovation, labeled as growth in total factor productivity (TFP). The second part shows how aggregate economic growth and innovation can be traced to its sources across industries. 2.1 Sources of Industry Growth In the analysis that follows, the fundamental economic agent is a representative industry. The first step towards decomposing aggregate economic growth to its industry sources is to analyze the determinants of industry economic growth. The growth ac- DRAFT counting tool kit assumes an industry-specific production function that expresses each industry’s output as a function of inputs and its available technology at that point in time.5 The constant-quality quantity of output produced by representative industry j depends on the industry’s use of capital, labor, intermediate materials, and the level of technology T at time t. The non parametric production function is written: Yj = fj (Kj , Lj , Xj , Tj ) (1) By differentiating equation (1) with respect to time and assuming factors are paid their marginal products, optimality conditions for producer profit maximization imply that the growth of output can be decomposed into changes in inputs and TFP growth: ∆ ln Yj = v̄K,j ∆ ln Kj + v̄L,j ∆ ln Lj + v̄X,j ∆ ln Xj + vT,j (2) where v̄K,j is the average income share of capital in periods t and t − 1, and similar for the other inputs. vT,j is TFP growth for industry j from period t − 1 to t and measures innovation growth over the period, capturing gains in technology, increases in output quality (holding inputs fixed), and any changes in managerial or business acumen 5 Notation throughout is borrowed from JHS. 6 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" that produces more output with the same level of resource use. With data on the production of output by the j industries in the economy and their use of capital, labor, and intermediate materials, the unobservable contribution of innovation to growth for the industry is the residual after subtracting the contributions of factors of production from the growth in industry output. Furthermore, industry output can be decomposed into contributions from value added growth and contributions from intermediate input. The fundamental accounting identity is that under perfect competition the value of industry output equals the value of inputs used to produce that output: PY,j Yj = PV,j Vj + PX,j Xj (3) where PY,j is the price of industry j’s output and PX,j and Xj are the prices and quantities of intermediate purchases of industry j. PV,j and Vj are the price and quantity of industry value added and PV,j Vj captures the direct nominal value added flow that is the dollar value contribution of industry j that is not accounted for by the production of goods or services by other sectors and used in the production process of industry j.6 This avoids double counting the value of output produced by other industries in DRAFT the contribution of industry j. By differentiating equation (3) with respect to time, grouping terms involving quantities, and taking a discrete time approximation: ln ∆Yj = vV,j ¯ ∆ ln Vj + vX,j ¯ ∆ ln Xj (4) where vV,j ¯ is the average nominal value added share in gross output in periods t and t−1, and vX,j ¯ is the average intermediate input share. Equation (4) expresses the growth rate in industry output as a weighted sum of the growth rates of value added and intermediate input, where the weights are value shares in output. Equation (4) can be used to estimate value added growth by industry when output growth and intermediate growth are observed; this is known as the double-deflation approach because outputs and inputs are deflated individually. 2.2 Aggregate Growth and Innovation This section shows how contributions from individual industries aggregate to the economy as a whole. The production possibility frontier expresses growth at the aggregate level as a weighted sum of the growth rates of individual industries. This approach ac6 It could be the case that the output of industry j is also used as an input into the production of industry j, in which case this treated as both an output and an input. For purposes of calculating value added, this is subtracted from the value of output just as any other intermediate input. 7 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" commodates changes in relative output prices across industries, thus reflects the rapid technological progress in information technology goods that manifests as rapidly falling prices. Using real value added Vj from equation (4), aggregate value added growth from the production possibility frontier is written: ∆ ln V = X w̄j ∆ ln Vj (5) j where w̄j is industry j’s average value added share in aggregate value added over periods t and t − 1; aggregate economic growth is the weighted sum of the growth rates of individual industry’s growth rates, weighted by each industry’s share of aggregate value added. Combining equations (5),(4),(2) yields a decomposition of aggregate growth across industry sources of growth and industry productivity growth rates: ∆ ln V = X j w̄j v̄L,j v̄K,j 1 ∆ ln Kj + w̄j ∆ ln Lj + w̄j v̄T,j v̄V,j v̄V,j v̄V,j (6) Aggregate value added growth can be decomposed into the weighted contributions of capital, labor, and productivity across industries where the weights DRAFT w¯j v̄V,j are referred to Domar weights and reflect the double nature of changes in production: the direct effect on aggregate value added and the indirect effect on final purchasers of the industry’s output.7 3 A Prototype NAICS-based Production Account This section describes, in brief, the data sources and methodology used to implement the growth accounting framework described in Section 2. This coincides with the approach used in Jorgenson et al. (forthcoming). Specifically, this section discusses the data necessary to implement equation (2) which forms the basis for the entire system of growth accounts. We split the aggregate economy into seventy industries which include a wide range of manufacturing industries, including details on several producers of IT equipment and software, along with detail on service sectors, including those that provide information technology services. It is important to rehash that it is not simply a matter of constructing ad hoc data to match the concepts in the growth accounting model, but our goal is to form a 7 An equivalent view of productivity, though not explicitly discussed here, is a decrease in industry output prices holding input prices fixed. This lends intuition to the dual effects of productivity growth, the first on aggregate value added itself, the second as cheaper prices facing purchasers. 8 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" set of internally consistent economic accounts so that concepts are comparable across industries and in accordance with the standards of national income accounting. The set of accounts satisfies national accounting identities in that all newly produced and consumed values are accounted for in the formation of national income by sector. The accounts described below represent the first effort of its kind to assemble a complete set of accounts on a NAICS industry classification covering 1960-2007. The NAICS classification allows for a finer classification of the role of services, including IT-Services. The long time series permits a historical accounting of the evolution of economic growth across the 1960-2007 horizon and a comparison between different periods within the sample. 3.1 Output and Intermediate Input The growth accounting approach above requires measure of output and intermediate input for each industry in the economy in current and constant dollars. For the years 1998-2007, this data is produced by the Bureau of Economic Analysis for some 500 sectors which we aggregate to our selected industries. For the years 1972-2006, we use the 202 sector NAICS based data from the BLS to construct output for our selected DRAFT industries, and for 1987-1997 control these estimates to 65 sector data from the national accounts produced by the BEA. To estimate NAICS based gross output for our industries for 1960-1972, we bridge industry output from previous studies based on SIC to our NAICS industries.8 This gives a time series of nominal output for our selected industries, which also serves as control totals for constructing the intermediate use estimates described below. We use a similar linking system to construct the time series of industry output prices, but employ tornqvist aggregation to go from more detailed data to our selected industries. The estimates of intermediate input by industry are derived from a time series of input output accounts that cover inter-industry transactions. We make them internally consistent with the values of industry output described above using the iterative proportional fitting routing described in Jorgenson et al. (1987). Furthermore, the estimates of the values of labor and capital services descried below are consistent with the value added row in the time series of input output tables we construct. The conceptual scheme of the input output framework is represented in Figure 1. Each column of the IO table represents an industry and each row for that column gives it purchases of commodity i, labeled Xij . Yj is the output produced by industry j, and industry value added is divided into payments to capital and labor services, and net 8 Specifically, we use and 88-sector SIC data set based on the methodology described in Jorgenson et al. (2005). 9 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" taxes. Each row of the table represents how each commodity is used, whether it be sold as intermediate input to other industries or to final demand Fi . As an accounting identity, the value of income accruing to capital and labor equals sales to final demand, the C + I + G + X − M definition of GDP. Figure 1: Input Output Structure j i Xij Fi Yic Kj L DRAFT j Tj Yj To construct the input output data for 1993-2007, we start with the inter industry transactions data from the Employment Projections group of the BLS that covers close to 200 NAICS sectors. We collapse their input output matrices to our industries of interest and use the iterative proportional fitting routing (RAS) described in Jorgenson et al. (1987) to fit them to our control totals of industry output describe above, and BEA data on final demand so that the resulting matrices produce an estimate of GDP that matches the national accounts. We also construct a time series of make tables consistent with our estimates of industry output. The make tables show the relationship between industry output and commodity output to capture that one industry can produce more than one commodity. For example, the Chemical industry produces non durable chemical products, but also machinery. The use table shows how industries use commodities, and the make table tells us the relationship between industry and commodity output. For years 1960-1992, we use the 1993 input output matrix as an initial guess, the final demand data from the BEA and use the RAS procedure and 10 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" industry output control totals described above to construct input output matrices. To derive prices for intermediate purchases, we assume all industries pay the same purchase price for individual commodities. We translate the industry output prices described above to commodity prices using the make table so that: ∆ ln PY C,i,t = X Mj,i V Ci j ∆ ln PY,j,t (7) so the commodity price is a weighted average of industry output prices where the weighs are each industry’s share of the total commodity being produced. The final price paid by purchasing industries also reflects the import prices available to producers. Thus, we construct the final supply price as a composite price of the domestic supply price and the price of imported goods, where the weights reflect the share of the commodity being imported.9 Finally, the quantity of intermediate input for each sector reflects the changing composition and prices of detailed commodities and is defined as: ∆ ln Xj,t = X v̄i,j,t ∆ ln Xi,j,t (8) i DRAFT so that total intermediate growth by industry required to implement equation (2) is a weighted average of the growth rates of the detailed commodities each industry uses as intermediate input. It is important to note that while prices paid for individual commodities are assumed to be the same across industries, the composite price that is implicit in equation(2) will differ by industry because the weights in equation (8) differ by industry. Summarizing, with data on output and intermediate, and their respective prices we construct ∆ ln Xj,t corresponding to the concept of real intermediate input growth in equation(2) for each industry. The estimates of capital and labor described below are consistent with value added in the IO accounts, forming an internally consistent set of accounts to use for productivity analysis. 3.2 Capital Input Analogous to aggregates of industry output and intermediate input, which are constructed to reflect changing relative prices of the components, capital and labor inputs by industry are adjusted to reflect heterogeneity in types of capital and labor used by producers. This section describes construction of capital input for each industry. 9 Import prices are given implicitly in the BLS use tables that give nominal and real imports by commodity. 11 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Capital input is the flow of capital services from the installed stock of capital into production. The first step is to estimate the capital stock for each employed asset for each industry over time. The capital stock is estimated with the perpetual inventory method with data from the fixed assets accounts from the Bureau of Economic Analysis that gives data on the price, quantity, and value of investment goods purchased by each industry since 1901.10 As discussed above, the prices are in constant-quality so the estimates of capital stock reflect constant-quality measure of the stock of available capital. Capital stock at time t is defined as: Ak,j,t = Ak,j,t−1 (1 − δk ) + Ik,j,t (9) where Ik,j,t is industry j’s real purchase of investment goods of type k and δk is the depreciation rate for each type of capital good, assumed to be the same across industries. Again, a key feature of the framework is that Ik,j,t is in constant quality units and the price index reflects changes in the quality of new investment goods. Depreciation rates are taken from BEA’s fixed asset study.11 Today’s capital stock for each industry j for type of capital k depends on the pervious period’s capital stock, adjusted for depreci- DRAFT ation and for new investment goods purchased in the period. In this prototype we use 52 assets based on BEA’s capital stock study, in addition to the stock of inventories and land capital.12 The capital service flow into production is proportional to the current and lagged stock and its prices is imputed using the Jorgenson rental cost of capital. Specifically: 1 Kk,j,t = (Ak,j,t + Ak,j,t−1 ) 2 (10) so that half of periods t’s investment comes online for production purposes in year t, and the other half in year t + 1. The rental cost of capital, i.e. the per period usage price for the installed stock of capital, is unobserved and imputed using economic theory. The Jorgenson cost of capital for this implicit rental price PK,k,j,t for asset type k in industry j at time t is: PK,k,j,t = 1 − IT Ck,t − τt Zk,t [rk,j,t PI,j,t−1 + δj PI,k,j,t ] + τp PI,k,j,t−1 1 − τt (11) where ITC is the investment tax credit rate in asset k, τt is the statutory tax rate, τp is the property tax rate, and Zk,t is the present discounted allowance of depreciation 10 11 12 See http://www.bea.gov/national/FA2004/index.asp An exception is for autos in which case we use a best geometric fit to BEA’s depreciation schedule. For details on the construction of the stocks of land and inventories see Jorgenson et al. (2005). 12 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" allowances for asset k. rk,j,t is a the ex-post rate of return imposing that total capital income in the industry is exhausted across income by asset, that is: X PK,k,j,t Kk,j,t = PV,j,t Vj,t − PL,j,t Lj, t (12) k Finally, the industry measure of capital services is constructed as an index number that takes into account the changing composition of capital over time: ∆ ln Kj,t = X v̄k,j,t ∆ ln Zk,j,t (13) k where v̄k,j,t is each asset’s average share of capital income in year t and t-1. Industry capital services growth is a weighted index of the growth rates of the service flows of the asset stocks in the industry, each weighted by its rental capital cost share. With this framework, assets with high rental costs, for example with those high depreciation rates, have a higher weight in the aggregation. For some intuition on the importance of using rental costs, information technology goods typically have relatively high depreciation rates so that these assets receive a high weight when their rental cost is used as a weight. In this case, the rapid accumulation of IT assets manifests in a fast growing DRAFT measure of industry capital services. These rental shares reflect the marginal products of different types of capital, so those with a higher marginal product receive a higher weight in aggregation. Summarizing, using the fixed asset data from the BEA, augmented to included land and inventories, the price and quantity of capital services by industry is derived using equations (9)-(13). 3.3 Labor Input Labor input reflects the heterogeneity of each industry’s work force. Using data from the decennial census we cross classify workers, their hours, and compensation by industry by sex, class (employee, self-employed), age (eight age groups), and educational attainment (six categories of educational attainment).13 For years other than the census, due to much smaller sample sizes, we construct a smaller set of matrices that contain a subset set of the detail based on the March supplement of the Current Population Survey. We then use the iterative proportional fitting routine (RAS) described in Jorgenson et al. (1987) to construct full matrices for years outside the census by using the census matrix as an initial guess and fitting it to the marginal matrices. 13 Compensation for self employed workers is set to be the same as those employees of the same demographic characteristics. 13 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" These labor matrices are scaled to match data from the national accounts so that they are consistent with the data on output, intermediate input, and capital services. Specifically, the matrices of employment, hours, and labor compensation are scaled to match the NIPA data, thus are estimated so that the value of labor plus capital compensation equals value added from the input output accounts. Thus, the sum of labor compensation, capital compensation, and net taxes is internally consistent with the value added row of the input output tables described above. Using the matrix of hours worked and labor compensation by worker and industry, the industry index of labor input reflects the changing composition of the work force and is defined as: ∆ ln Lj,t = X v̄l,j,t ∆ ln Hl,j,t (14) l where v̄l,j,t is the average compensation share for worker type l in industry j and Hl,j,t is that group’s corresponding hours worked. Thus, labor input for the industry required to implement equation (2) is defined as a weighted average growth rate of hours worked by worker, where the weights are the worker compensation shares. These compensation shares reflect the marginal products of different workers, so those with a higher marginal DRAFT product receive a higher weight in aggregation. While all of the source data required to implement the above procedure to construct labor input is available for 2003-2007, much of the detail on NAICS is missing before 2003. Therefore, to construct matrices of employment, hours, and labor compensation for 1960-2002, we link the SIC matrices used in Jorgenson et al. (2007) using ratios of employment in SIC to NAICS published by the BLS Current Employment Statistics. We do this by detailed demographic category so a share of workers gets mapped from each SIC industry to the same demographic group of the corresponding of the NAICS industry, or often industries. From 1987-2003 these matrices are scaled to the data from the BEA on labor compensation by industry, so these estimates are consistent with the national accounts, along with the measures of capital compensation and industry value added described above.14 For years before 1987, we use a combination of NAICS based control totals for employment from the BLS and internally constructed control totals for labor compensation based on a mapping between SIC and NAICS industries. 14 The BEA provides detail for about 65 industries. We scale the total of the corresponding industries to match the data from BEA. 14 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" 4 How Industries Use Semiconductors With the methodology and data described above, the role of semiconductors as an input into the production processes of other industries can be measured. While Jorgenson (2001) identified the Semiconductor industry as the key driver of innovation across other producers of Information Technology, this is the first systematic study of the contribution of semiconductors to the growth of using industries. First, as discussed above, the rapid quality gains in semiconductor performance are reflected in the constant quality price index of semiconductors. Figure 2 shows the price of semiconductors relative to the GDP price on a logarithmic scale. On the log scale, exponential price declines appear as a linear trend. The figure shows the exponential decline in semiconductor prices relative to other prices in the economy and the turning point in 1995 which Jorgenson (2001) argues is due to a shift in the product cycle of new chips to two years from three. This change in product cycle manifests as change in the slope of the price line around 1995; price declines averaged about 5% percent per year before 1995 and about 15% per year after. These rapid price declines reflect the quality gains in semiconductor performance because a doubling in the quality of the chip being produced corresponds to a 50% percent decline in the corresponding price DRAFT index, ceteris paribus. This rapid price decline produces incentives for industries to substitute towards making use of these cheaper, higher quality, devices. 4.1 Semiconductor Use as an Intermediate Input To measure the contribution of semiconductors to the growth of using industries, intermediate input in equation (2) can be further decomposed to show the impact of semiconductor use: ∆ ln Yj = v̄K,j ∆ ln Kj + v̄L,j ∆ ln Lj + v̄Xx,j ∆ ln Xxj + v̄Xs,j ∆ ln Xsj + vT,j (15) where Xxj is the intermediate use excluding semiconductors by industry j and Xsj is the use of semiconductors in producing the output of industry j. Figure 3 shows that the contribution of semiconductors, v̄Xs,j ∆ ln Xsj in equation (15), accounted for a significant portion of output growth for many sectors of the economy. Over the period as a whole from 1960-2007, semiconductor use produced about two percent per year of output growth for the Communications Equipment and Computer Equipment industries.15 While at first glance this two percent per year seems 15 The semiconductor industry uses semiconductors to produce semiconductors, captured via the diagonal matrix of the use table. 15 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Figure 2: Semiconductor Prices 100.00 10.00 1.00 0.10 Note: Domestic supply price of the semiconductor commodity relative to the GDP price. Log scale. Source: Author’s calculation. DRAFT trivial, this amounts to about 37% of total output growth of the Communications industry, and 8% of the total growth of the Computer industry. In other words, based on Figure 4, which shows the share of each industry’s output growth accounted for by use of semiconductors, semiconductor use alone accounted for 37% of the growth in Communications Equipment over the period, while combining all of the other factors of production used by the industry including capital, labor, the other 69 type of intermediate input, and total factor productivity accounted for only 63% percent of output growth. More strikingly, if factors contributed equally, the factors of productions would each account for about 1.5% of output, but semiconductors account for about 26 times that amount! Figure 3 shows that semiconductor use had a broad impact on other industries in the economy. While semiconductors had the largest impact on other producers of Information Technology goods, growth in semiconductor use also contributed significant amounts to growth of other producers of durable goods like the Motor Vehicles and Machinery industries, but also a wide range of producers of non durables and services. Plastics and Metals made significant use of semiconductors as did Broadcasting, and the Wholesale sector. It is interesting that during the 2000-2007 period, when the 16 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Figure 3: Contribution of Semiconductors to Industry Output Growth 1960-2007 2000-2007 Communications equipment… Semiconductor and other electronic… Computer and peripheral equipment… Other electronic products Electrical equipment appliances and… Software publishing Motor vehicles bodies and trailers… Machinery Other transportation equipment Plastics and rubber products Miscellaneous manufacturing Primary metals Fabricated metal products Nonmetallic mineral products Broadcasting and telecommunications Furniture and related products Paper products Computer systems design and related… Printing and related support activities Textile mills and textile product mills Chemical products Wholesale Trade Information and data processing… Federal General government Wood products Other services except government Food and beverage and tobacco… Petroleum and coal products Retail Trade Educational services 0.00 Other electronic products Other transportation equipment Software publishing Broadcasting and telecommunications Primary metals Federal General government Information and data processing… Miscellaneous manufacturing Plastics and rubber products Nonmetallic mineral products Wholesale Trade Machinery Paper products Fabricated metal products Motor vehicles bodies and trailers… Printing and related support activities Furniture and related products Chemical products Other services except government Food and beverage and tobacco… Computer systems design and related… Wood products Retail Trade Miscellaneous professional scientific… Petroleum and coal products Educational services Legal services Administrative and support services Hospitals Nursing and residential care… Management of companies and… 0.01 0.01 0.02 0.02 0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.01 Note: Semiconductor contribution to output growth by industry for the top thirty industries to which they contribute. Source: Author’s calculation. DRAFT growth of IT fell relative to the 1995-2000 boom, non-IT industries that rely on semiconductors continued to employ these devices to grow their output. For example, while IT-producers purchases of semiconductors fell in the 2000-2007 period relative to the boom, Other Transportation Equipment, Broadcasting and Telecom, Primary Metals, used semiconductors to grow their output over that period. Figure 4 shows the share of using industries output growth accounted for by the use of semiconductors. Output growth, from equation (2) can be decomposed into the contribution from intermediate input, including semiconductors, capital, labor services, and total factor productivity. This figure gives the contribution of semiconductor use relative to total output growth. Strikingly, for the 1960-2007 period over forty percent of the output of the Primary Metal industry can be accounted for by its purchases of semiconductor input. That means that all of the other remaining factors of production and TFP account for less than 60% of its output growth. Textile Mills, Nonmetallic Mineral, Motor vehicles, among others had a significant portion of their output accounted for by their use of semiconductors. In the 2000-2007 period, Food and Tobacco made wide use of semiconductors, as did the Chemical, Wholesale, and Construction industries. Summarizing, these figures show the widespread impact of semiconductor use on other industries in the economy. Responding to the rapid constant quality price de- 17 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Figure 4: Share of Output Accounted for by Semiconductor Use 1960-2007 2000-2007 Primary metals Communications equipment… Other electronic products Electrical equipment appliances and… Semiconductor and other electronic… Other transportation equipment Textile mills and textile product mills Computer and peripheral equipment… Nonmetallic mineral products Motor vehicles bodies and trailers… Machinery Fabricated metal products Paper products Miscellaneous manufacturing Furniture and related products Printing and related support activities Plastics and rubber products Federal General government Chemical products Wood products Other services except government Food and beverage and tobacco… Broadcasting and telecommunications Wholesale Trade Software publishing Computer systems design and related… Petroleum and coal products Information and data processing… Transit and ground passenger… Educational services Other electronic products Motor vehicles bodies and trailers… Communications equipment… Other transportation equipment Food and beverage and tobacco… Miscellaneous manufacturing Chemical products Electrical equipment appliances and… Federal General government Wholesale Trade Construction Software publishing Broadcasting and telecommunications Other services except government Petroleum and coal products Information and data processing… Textile mills and textile product mills Legal services Computer systems design and related… Educational services Retail Trade Utilities Management of companies and… Administrative and support services Miscellaneous professional scientific… Apparel and leather and allied products Hospitals Nursing and residential care… Food services and drinking places S&L General Government S&L Government enterprises 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.00 0.05 0.10 0.15 0.20 0.25 Note: Share of industry output accounted for by semiconductor input for the top thirty industries to which the contribute. Source: Author’s calculation. DRAFT clines in semiconductors, industries responded by employing semiconductors in their production in new and innovative ways, to produce cheaper and higher quality output. Table 5 gives the complete accounting of semiconductors as an intermediate input across industries. 4.2 Semiconductor Contribution to Labor Productivity Semiconductors contribute to the measured efficiency of labor in using industries. That is, the growth of output per hour, or labor productivity, by industry depends directly on the use of semiconductors. Subtracting the growth rate of hours worked from the both sides of equation (15) yields and expression for the growth rate of labor productivity (ALP): ∆ ln ALPj = v̄K,j ∆ ln Lj Xxj Xsj Kj + v̄L,j ∆ ln + v̄Xx,j ∆ ln + v̄Xs,j ∆ ln + vT,j Hj Hj Hj Hj (16) where Hj is hours worked and the share weighted growth rate of an input less hours worked is referred to is input deepening. The intuition is that labor hours can be more productive because the industry employs more inputs, like capital, per hour worked, 18 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Figure 5: Share of ALP Accounted for by Semiconductor Deepening 1960-2007 2000-2007 Communications equipment… Other electronic products Educational services Semiconductor and other electronic… Electrical equipment appliances and… Computer and peripheral equipment… Other transportation equipment Motor vehicles bodies and trailers… Primary metals Fabricated metal products Nonmetallic mineral products Machinery Plastics and rubber products Printing and related support activities Miscellaneous manufacturing Paper products Furniture and related products Textile mills and textile product mills Chemical products Federal General government Other services except government Wood products Transit and ground passenger… Broadcasting and telecommunications Wholesale Trade Software publishing Food and beverage and tobacco… Information and data processing… Hospitals Nursing and residential care… Petroleum and coal products Communications equipment… Other electronic products Other transportation and support… Semiconductor and other electronic… Computer and peripheral equipment… Other transportation equipment Nonmetallic mineral products Fabricated metal products Primary metals Electrical equipment appliances and… Machinery Plastics and rubber products Paper products Printing and related support activities Motor vehicles bodies and trailers… Textile mills and textile product mills Furniture and related products Miscellaneous manufacturing Federal General government Food and beverage and tobacco… Other services except government Wholesale Trade Software publishing Chemical products Broadcasting and telecommunications Wood products Information and data processing… Petroleum and coal products Computer systems design and related… Legal services 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.00 0.05 0.10 0.15 0.20 0.25 0.30 Note: Share of industry ALP accounted for by semiconductor input deepening for the top thirty industries to which the contribute. Source: Author’s calculation. DRAFT or by using more intermediate inputs, like semiconductors, per hour worked, or by innovating via TFP. Figure 5 shows the importance of semiconductor use for labor productivity for the top thirty industries ranked as a share of ALP growth. Over the 1960-2007, semiconductor deepening (growth of semiconductors per hour worked) accounted for over 35% of the growth of labor productivity in the Communications Equipment industry. Over that period, semiconductor use accounted for a significant portion of labor productivity growth for manufacturing industries like Other Electronic Products, Electrical Equipment, Other Transportation Equipment, and Motor Vehicles. Also, Educational Services, Primary Metal, Federal General Government, Wholesale all saw labor productivity gains due to increased use of semiconductors. The 2000-2007 contribution of semiconductors to labor productivity growth to using industries was very similar to that for the period as whole. 5 The Aggregate Impact of Semiconductors This section measures the contribution of the Semiconductor industry to aggregate U.S. economic growth and productivity. Using equation (6), aggregate value added in the economy can be decomposed into contributions from individual industries. Each 19 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" industry contributes to aggregate value added by employing capital and labor services, and innovating, to produce gross output that gets sold either to other industries as intermediate input or to final demand. Figures 6 shows productivity (TFP) growth for each of the industries for the 19602007 based on equation (2). As discussed above, total factor productivity is a primary measure of economic innovation, endorsed by Schramm et al. (2008), because it captures how industries can produce more output holding inputs fixed, and encompasses improvements in product quality. TFP captures product innovation because increased quality is reflected in the constant quality output growth of industry output. For the period as a whole, producers of IT dominated economic innovation. In the Computer industry, productivity grew by almost 11% per year, remarkable compared to the economy wide productivity growth rate of 0.41% per year reported by Jorgenson et al. (forthcoming). The Semiconductor industry exhibited the third highest innovation rate from 1960-2007, following Software Publishing. Over 1960-2007, Semiconductor TFP grew by close to 9% per year, almost 22 times higher than the rate of aggregate productivity growth in the economy! Other high productivity industries include the Securities, Commodities, and Investment industry, Trade, Transportation, and Farms. Jorgenson et al. (forthcoming) argue that industries that make intensive use of information technology DRAFT have higher productivity growth rates than those do not. During the IT boom years of 1995-2000, the Semiconductor industry had the fastest innovation rate in the economy. Figure 7 shows that productivity grew on average of 20% per year in the Semiconductor industry over the period, followed by about 17% per year in the Computer industry. Jorgenson (2001) traces the rapid growth of productivity in the Semiconductor industry after 1995 to a change in the product cycle to two from three years; during this period, higher quality semiconductors were produced at an even faster rates than in previous periods. These gains in technology manifest in the TFP growth rate of the industry. Just as for the period as a whole, innovation rates in industries that made intensive use of IT outpaced that of non-IT industries. For the 2000-2007 period, productivity growth in Semiconductors fell compared to the blistering 1995-2000 pace, but still had the second highest productivity growth rate in the economy and grew ten times more rapidly than aggregate economy productivity growth rate. Furthermore, Jorgenson et al. (forthcoming) show that industries that made intensive use of IT dominated the productivity growth of industries that did not rely as much on IT. Because semiconductor technology had a major role in the advancement of IT production and services, the productivity growth of IT-Users is ultimately tied to innovation in the Semiconductor industry. As the quality adjusted price of semiconductor fell and quality increased, there is strong evidence that industries that 20 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" are able to organize their production processes to take into account this higher quality and cheaper technology are outperforming sectors that are unable to realize the gains from the new technology. The Retail and Wholesale industries, which have relatively intensive use in IT in the post 1995 period are high productivity producers indicating they are able to economize on gains from this semiconductor related technology. These results are not surprising; we observe that most restaurants have computerized and can easily imagine how wholesalers use computers to manage their trades. To analyze the impact of the Semiconductor industry on aggregate growth and productivity, equation (6) can be decomposed to show the impact individual industries and groups of industries. First, using equation (5) for the production possibility frontier: X ∆ ln V = X w̄j ∆ ln Vj + j∈IT-Prod w̄j ∆ ln Vj + j∈IT-Use X w̄j ∆ ln Vj (17) j∈Non-IT where IT-Prod refers to industries classified as producers of information technology equipment and services, and IT-Use are industries that rely intensively on purchases of Information Technology services.16 Since the contribution of an individual industry is its growth rate times its value share, groups of industries can be formulated as simple weighted sums. DRAFT Similarly, equation (6) can be decomposed to show the contributions of industries to the aggregate innovation rate. Contributions for the IT-Producer, IT-User, and Non-IT groups are defined as: X j w̄j 1 v̄V,j v̄T,j = X j∈IT-Prod w̄j 1 v̄V,j v̄T,j + X j∈IT-Use w̄j 1 v̄V,j v̄T,j + X j∈Non-IT w̄j 1 v̄V,j v̄T,j (18) so that aggregate Domar weighted productivity growth can be decomposed into that due to individual industries and sectors of the economy. A starting point for analyzing the contribution of individual industries to economic growth is each industry’s share of nominal aggregate value added, given in Table 3. If industries grew equally over time, each industry’s contribution would equal this share. Over the period as a whole, IT-Producing industries averaged 1.8% of nominal aggregate value added and the Semiconductors industry averaged 0.4%. Relative to the rest of the economy, IT-Production had a much smaller share compared to the IT-Using (50.9%) and Non-IT industries (47.%). Again if industries grew at the same rate this would imply that IT production would account for less than 2% of economic growth, but we will see below that the contribution of IT-Producers greatly outweighed its share in value added. The increased importance of semiconductors during the IT16 See Jorgenson et al. (forthcoming) for a discussion of how industries are classified. 21 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Figure 6: Industry Productivity Growth 1960-2007 Computer and peripheral equipment manufacturing Software publishing Semiconductor and other electronic component… Securities commodity contracts and investments Wholesale Trade Warehousing and storage Air transportation Rail transportation Farms Retail Trade Textile mills and textile product mills Broadcasting and telecommunications Other transportation and support activities Miscellaneous manufacturing Other electronic products Accommodation Truck transportation Communications equipment manufacturing Water transportation Pipeline transportation Plastics and rubber products Furniture and related products Waste management and remediation services Social assistance Mining except oil and gas Motor vehicles bodies and trailers and parts Machinery Apparel and leather and allied products Fabricated metal products Performing arts spectator sports museums and related… Electrical equipment appliances and components Petroleum and coal products Other transportation equipment Federal General government Nonmetallic mineral products Motion picture and sound recording industries Miscellaneous professional scientific and technical services Wood products Amusements gambling and recreation industries Printing and related support activities Chemical products Food services and drinking places Paper products Food and beverage and tobacco products Information and data processing services Household Administrative and support services S&L General Government Primary metals Federal Government enterprises Insurance carriers and related activities Management of companies and enterprises Other services except government Support activities for mining Utilities Educational services Forestry fishing and related activities Construction Real estate S&L Government enterprises Hospitals Nursing and residential care facilities Transit and ground passenger transportation Ambulatory health care services Federal Reserve banks credit intermediation and related… Computer systems design and related services Legal services Newspaper; periodical; book publishers Funds trusts and other financial vehicles Rental and leasing services and lessors of intangible assets Oil and gas extraction DRAFT -4 -2 0 2 4 6 8 Percent per Year Note: Industry Productivity Growth by industry. Source: Author’s calculation. 22 10 12 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Figure 7: Industry Productivity Growth 1995-2000 Semiconductor and other electronic component… Computer and peripheral equipment manufacturing Securities commodity contracts and investments Software publishing Mining except oil and gas Wholesale Trade Warehousing and storage Farms Retail Trade Federal Government enterprises Forestry fishing and related activities Petroleum and coal products Miscellaneous manufacturing Rail transportation Waste management and remediation services Plastics and rubber products Textile mills and textile product mills Primary metals Pipeline transportation Real estate Utilities Other transportation and support activities Truck transportation Apparel and leather and allied products Accommodation Air transportation Motion picture and sound recording industries Other transportation equipment Paper products Electrical equipment appliances and components Newspaper; periodical; book publishers S&L Government enterprises Nonmetallic mineral products Communications equipment manufacturing Insurance carriers and related activities Food services and drinking places Household Miscellaneous professional scientific and technical… Social assistance Transit and ground passenger transportation Administrative and support services Furniture and related products Wood products S&L General Government Fabricated metal products Printing and related support activities Federal General government Motor vehicles bodies and trailers and parts Hospitals Nursing and residential care facilities Ambulatory health care services Performing arts spectator sports museums and related… Computer systems design and related services Chemical products Water transportation Construction Management of companies and enterprises Other services except government Food and beverage and tobacco products Broadcasting and telecommunications Legal services Machinery Educational services Amusements gambling and recreation industries Support activities for mining Information and data processing services Other electronic products Federal Reserve banks credit intermediation and related… Oil and gas extraction Funds trusts and other financial vehicles Rental and leasing services and lessors of intangible assets DRAFT -10 -5 0 5 10 15 Percent per Year Note: Industry Productivity Growth by industry. Source: Author’s calculation. 23 20 25 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Figure 8: Industry Productivity Growth 2000-2007 Computer and peripheral equipment manufacturing Semiconductor and other electronic component… Information and data processing services Software publishing Securities commodity contracts and investments Air transportation Retail Trade Broadcasting and telecommunications Computer systems design and related services Communications equipment manufacturing Farms Miscellaneous professional scientific and technical… Miscellaneous manufacturing Other electronic products Social assistance Real estate Textile mills and textile product mills Other transportation and support activities Motor vehicles bodies and trailers and parts Rail transportation Administrative and support services Other transportation equipment Electrical equipment appliances and components Pipeline transportation Apparel and leather and allied products Machinery Chemical products Truck transportation Printing and related support activities Furniture and related products Wood products Warehousing and storage Federal Reserve banks credit intermediation and related… Wholesale Trade Amusements gambling and recreation industries Utilities Fabricated metal products Accommodation Water transportation Ambulatory health care services Paper products Food services and drinking places Federal General government Insurance carriers and related activities Food and beverage and tobacco products Household Nonmetallic mineral products Plastics and rubber products Motion picture and sound recording industries Other services except government Performing arts spectator sports museums and related… Forestry fishing and related activities Hospitals Nursing and residential care facilities Newspaper; periodical; book publishers Transit and ground passenger transportation S&L General Government Waste management and remediation services Legal services S&L Government enterprises Funds trusts and other financial vehicles Primary metals Federal Government enterprises Educational services Petroleum and coal products Mining except oil and gas Construction Management of companies and enterprises Support activities for mining Rental and leasing services and lessors of intangible assets Oil and gas extraction DRAFT -10 -5 0 5 10 Percent per Year Note: Industry Productivity Growth by industry. Source: Author’s calculation. 24 15 20 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Table 1: IT-Related Industries IT-Producing Industries IT share 2005 Computer and peripheral equipment mfg Communications equipment mfg Semiconductor and other electronic component mfg Software publishing Information and data processing services Computer systems design and related services 0.3571 0.3868 0.4105 0.4421 0.7929 0.9497 IT-intensive Using Industries Construction Machinery Motor vehicles bodies and trailers and parts Other transportation equipment Miscellaneous mfg Printing and related support activities Wholesale Trade Retail Trade Air transportation Water transportation Transit and ground passenger transportation Pipeline transportation Other transportation and support activities Broadcasting and telecommunications Fed. Res. banks, credit intermediation Securities commodity contracts and investments Insurance carriers and related activities Rental & leasing, and lessors of intangible assets Legal services Misc. professional scientific and technical services Management of companies and enterprises Administrative and support services Waste management and remediation services Educational services Hospitals Nursing and residential care facilities Social assistance Performing arts, spectator sports & related activities Federal General government S&L General Government Other electronic products Newspaper; periodical; book publishers DRAFT 0.2271 0.3387 0.2428 0.3053 0.1631 0.2018 0.2186 0.1572 0.6796 0.4788 0.3182 0.4168 0.1789 0.5695 0.2226 0.8461 0.3161 0.3217 0.3382 0.6331 0.5426 0.5017 0.1759 0.5468 0.3715 0.2125 0.2291 0.3046 0.1672 0.4445 0.5459 Notes: IT-Using industries are those with more than the median share of 15.4 percent for III in 2005. Note: For discussion of industry classification see Jorgenson et al. (forthcoming). 25 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Boom of 1995-2000 is evident in its value share which increased to 0.7% of value added; the Computer industry showed a similar increase. Following 2000, the share of ITProduction in aggregate value added fell relative to the 1995-2000 level, but the results below show that the contribution of IT-Producers, including Semiconductors still far outweighed their shares in value added. Table 3: Value Added Shares Value Added Shares IT-Producing Industries Information and data processing services Computer systems design and related services Computer and peripheral equipment manufacturing Communications equipment manufacturing Semiconductor manufacturing Software publishing IT-Using Industries Non-IT Industries 1960-2007 1960-1995 1995-2000 2000-2007 100.0 1.8 0.2 0.5 0.3 0.2 0.4 0.2 50.9 47.3 100.0 1.5 0.2 0.3 0.3 0.3 0.4 0.1 50.1 48.4 100.0 3.0 0.3 0.9 0.3 0.3 0.7 0.5 52.7 44.4 100.0 2.8 0.4 1.1 0.2 0.2 0.4 0.5 53.2 44.0 Note: Each industry’s share in aggregate value added. IT-Producing, IT-Using, and Non-IT are defined in Jorgenson et al. (forthcoming). Source: Author’s calculations. Table 4, based on equations (17) and (18), shows that the contribution of the Semi- DRAFT conductor industry, and other IT-Producers that make heavy use of semiconductors, greatly outweighs their value shares and were key drivers of growth and productivity over the whole sample period, and each of the sub-samples. The top line of the table gives aggregate economic growth from the production possibility frontier of equation (5) which can be decomposed into the contributions of IT-Producing, IT-Using, and Non-IT industries using equation (17). Of the 3.45% average growth over the 1960-2007 period, 0.31% resulted from the direct production of Information Technology goods and services. Compared to its value added share of 1.8%, this implies that IT-Producers contributed about five times their share. Alternatively, had all industries grown equally, IT-Production would have accounted for 1.8% of growth, but this sector accounted for five times that amount. Over the period, the Semiconductor industry contributed 0.10% to aggregate value added growth, or 3% of aggregate growth, but over seven times its nominal share! This can be compared to the IT-Using and Non-IT industries that accounted for 51% and 40% of aggregate value added, respectively, actually less than their shares of nominal value added. During the IT-Boom, the contribution of the Semiconductor industry to value added growth was even more pronounced. Value added growth in the Semiconductor industry alone accounted for over 7.5% of aggregate economic growth, almost 12 times its value added share! IT-Producers as a whole accounted for almost 18% of growth even though 26 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" their share was only 3% of value added. Following the IT-Boom, aggregate value added growth fell relative to the boom and contributions from the IT-Producing, IT-Using, and Non-IT sectors all fell. During this period, Semiconductors accounted for 1.7% of the 2.78% average annual growth over the period. While this contribution fell relative to the boom, this still outweighed the nominal value added share by a factor of four. For IT-Producers as a whole, their contribution was about 3.5 times their nominal value added share, so the contribution of Semiconductor production outpaced the group as a whole. Like earlier periods, IT-Using and Non-IT industries produced gains in close proportion to their shares in aggregate value added. Table 4 also shows how IT-Producers dominated innovation over the period. While innovation accounted for less than 10% of growth over the period, this was led by productivity due to IT-related production. First, one should not interpret the small innovation rate for the economy as a whole, on average of 0.33% per year, as indicating that innovation is not important for economic growth. Jorgenson et al. (forthcoming) show that these economy wide innovation rates induce large investments in human and physical capital that drive economic growth over time. Of the 0.33% per year of aggregate productivity, the Semiconductor industry contributed 0.10% per year, i.e. the Semiconductor industry alone accounted for 30% of aggregate productivity growth, or DRAFT about 160 times its value added share. IT-Producers as a group contributed 0.22% per year to aggregate productivity growth, or about thirty six times the group’s share in aggregate value added. During the IT-Boom of 1995-2000, the Semiconductor industry alone accounted for 48% of aggregate productivity growth, and the IT-Producer group for almost 80% of the aggregate total. In the 2000-2007 period, innovation rates fell relative to the boom in the aggregate and for the IT-Producer group, but the Semiconductor industry alone still accounted for 10% of aggregate productivity and the IT-Producer group for over 43%. While aggregate growth and innovation slowed during that period, the Semiconductor industry innovated at higher rates than all other industries in the economy, except the Computer industry. 6 Semiconductor Productivity: 2008 & 2009 Even though the complete source data to analyze the sources of growth and productivity is available through 2007 only, it is possible to get an estimate of more recent developments using a back of the envelope approach. Instead of using primary data on both prices and quantities, using only prices, and holding quantities fixed, gives an updated picture of productivity in the Semiconductor industry through 2009. This approach is based on the price-dual estimate of industry total factor productivity. The 27 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Table 4: Decomposition of Aggregate Growth Value-Added (ΔlnV=(V1)+(V2)+(V3)=(KT)+(LT)+(DT)) 1960-2007 1960-1995 1995-2000 2000-2007 3.45 3.42 4.52 2.78 Contributions (V1) IT-Producing Industries Information and data processing services Computer systems design and related services Computer and peripheral equipment manufacturing Communications equipment manufacturing Semiconductor manufacturing Software publishing (V2) IT-Producing Industries (V3) Non-IT Industries 0.31 0.02 0.04 0.09 0.01 0.10 0.05 1.75 1.39 0.24 0.01 0.02 0.08 0.01 0.08 0.04 1.77 1.41 0.81 0.03 0.13 0.20 0.02 0.34 0.09 2.31 1.40 0.28 0.06 0.05 0.07 -0.01 0.05 0.05 1.27 1.24 (KT) Domar Weighted Capital Input (LT) Domar Weighted Labor Input (DT) Domar Weighted TFP (D1) IT-Producing Industries Information and data processing services Computer systems design and related services Computer and peripheral equipment manufacturing Communications equipment manufacturing Semiconductor manufacturing Software publishing (D2) IT-Using Industries (D3) Non-IT Industries 2.16 0.95 0.33 0.22 0.01 0.00 0.09 0.00 0.10 0.03 0.18 -0.07 2.19 1.02 0.22 0.16 0.00 -0.01 0.07 0.00 0.07 0.03 0.15 -0.10 2.53 1.33 0.67 0.53 -0.02 -0.01 0.19 0.00 0.32 0.05 0.10 0.04 1.76 0.35 0.67 0.29 0.06 0.03 0.08 0.00 0.07 0.04 0.35 0.03 DRAFT Note: V1-V3 sum to aggregate value added growth, as does KT+LT+DT. D1-D3 sum to DT. Source:Author’s calculations. price dual estimate of total factor productivity is equivalent to that from the primal quantity side in equation (2). Differentiating the accounting identity equation (3) with respect to time and using the definition of vT,j from equation (2) yields the price dual estimate of industry total factor productivity, which produces an equivalent estimate to the primal, but uses weighted growth rates of prices in replace of quantities. vT,j = v̄K,j ∆ ln PK,j + v̄L,j ∆ ln PL,j + v̄X,j ∆ ln PX,j − ∆ ln PY j (19) so that the price dual estimate is the share-weighted growth in inputs prices less the growth in the output price. The intuition for this formulation is that if an industry is able to lower the price it charges for fixed input prices, this is due to gains in productivity. I use the price dual approach to derive estimates for productivity in the Semiconductor industry in 2008 and 2009. The price of Semiconductor output PY j is available through 2009 from the Bureau of Economic Analysis. To estimate the price of intermediate input, I assume that intermediate input prices that have a share of five percent or less in the total value of industry output grew at the same rate in 2008 and 2009 as the 28 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" GDP price. For intermediate inputs with a share of greater than 5 percent (Wholesale, Semiconductor, and Management of Companies), I assume that these prices grew like the output prices for these sectors. Finally, I assume that the price of capital and labor grew like the aggregate economy capital and labor price.17 This approach yields estimates that productivity in Semiconductor industry grew by 12.5% and 5.6% in 2008 and 2009, respectively. These growth rates are a decline from the blistering pace of productivity growth for semiconductor production in the late 1990’s of around 20% per year, but are well above typical productivity growth rates observed between 1960 and 2007 for the other industries in the U.S. economy. 7 Conclusions This paper develops a framework and data set to analyze the economic impact of semiconductor production in the U.S. from 1960-2007. Over that period, innovation in the Semiconductor industry grew close to 9% per year, twenty five times the innovation growth rate for the economy as a whole. Over the 1995-2000 period, the innovation rate was around 21% per year, thirty one times that of the economy as a whole. Because a defining feature of semiconductor production is that the devices are used as an inter- DRAFT mediate input for many other industries, I quantify the contribution of semiconductors to growth in using industries. From 1960-2007, semiconductors accounted for 41% of the growth of the Primary Metals industry, 37% of the Communications Equipment industry, and 8% of the Computer industry. From 2000-2007, the period following the IT-Boom, semiconductors had a widespread impact on many sectors of the economy including accounting for 24% of the growth of the Other Electronic Components industry, 16% of the Motor Vehicles industry, 15% of the Communications Equipment industry, 7% of the Other Transportation equipment industry, and 5% of the growth in Food and Beverages. The results show the broad impact of semiconductors, from their contribution to the remarkable productivity gains in the production of IT-equipment itself, to the more widespread gains post-2000 in industries that use semiconductors as an intermediate input. 17 I verified that this approach produces reasonable results by comparing it to the estimates using the actual prices for all inputs and outputs for 1960-2007. The results are comparable. 29 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" A Appendix References Bernanke, C. (2011): “Promoting Research and Development: The Government’s Role,” . Jorgenson, D. (2001): “Information technology and the US economy,” American Economic Review, 1–32. Jorgenson, D., F. Gollop, and B. Fraumeni (1987): “Fraumeni, Productivity and US Economic Growth,” . Jorgenson, D. and Z. Griliches (1967): “The explanation of productivity change,” The Review of Economic Studies, 34, 249–283. Jorgenson, D., M. Ho, J. Samuels, and K. Stiroh (2007): “Industry origins of the American productivity resurgence,” Economic Systems Research, 19, 229–252. Jorgenson, D., M. Ho, and K. Stiroh (2005): Information technology and the DRAFT American growth resurgence, MIT Press, Cambridge, Mass. Jorgenson, D. and C. Wessner (2004): Productivity and Cyclicality in Semiconductors: Trends, Implications, and Questions: report of a symposium, Natl Academy Pr. Jorgenson, D. W., M. S. Ho, and J. D. Samuels (forthcoming): “Information Technology and U.S. Productivity Growth: Evidence from a Prototype Industry Production Account,” Journal of Productivity Analysis. National Science Foundation (2010): Science and Engineering Indicators 2010, NSF, Washington, DC. Schramm, C. et al. (2008): “Innovation Measurement–Tracking the State of Innovation in the American Economy,” A report to the Secretary of Commerce by The Advisory Committee on Measuring Innovation in the 21st Century Economy. Solow, R. (1957): “Technical change and the aggregate production function,” The Review of Economics and Statistics, 39, 312–320. Wasshausen, D. and B. Moulton (2006): “The role of hedonic methods in measuring real GDP in the United States,” Are We Measuring Productivity Correctly. 30 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" World Information Technology and Services Alliance (2010): Digital Planet 2010, WITSA, Washington, DC. DRAFT 31 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Table 5: Contributions of Semiconductors to Industry Output Growth. 1960-2007 Contribution Share Farms 0.000 0.00 Forestry fishing and related activities 0.000 0.01 Oil and gas extraction 0.000 0.00 Mining except oil and gas 0.000 0.01 Support activities for mining 0.001 0.02 Utilities 0.001 0.06 Construction 0.001 0.07 Wood products 0.041 2.26 Nonmetallic mineral products 0.101 7.50 Primary metals 0.123 41.35 Fabricated metal products 0.102 5.74 Machinery 0.166 5.93 Electrical equipment appliances and components 0.244 14.30 Motor vehicles bodies and trailers and parts 0.186 6.97 Other transportation equipment 0.140 8.82 Furniture and related products 0.094 3.94 Miscellaneous manufacturing 0.128 4.15 Food and beverage and tobacco products 0.026 1.63 Textile mills and textile product mills 0.078 8.62 Apparel and leather and allied products 0.008 -0.49 Paper products 0.090 5.16 Printing and related support activities 0.082 3.68 Petroleum and coal products 0.019 1.13 Chemical products 0.072 2.71 Plastics and rubber products 0.133 3.53 Wholesale Trade 0.071 1.38 Retail Trade 0.014 0.35 Air transportation 0.001 0.02 Rail transportation 0.000 0.06 Water transportation 0.001 0.03 Truck transportation 0.001 0.02 Transit and ground passenger transportation 0.003 0.42 Pipeline transportation 0.001 0.07 Other transportation and support activities 0.001 0.02 Warehousing and storage 0.000 0.00 Motion picture and sound recording industries 0.001 0.03 Broadcasting and telecommunications 0.098 1.52 Information and data processing services 0.059 0.76 Federal Reserve banks credit intermediation and related 0.001 activities0.02 Securities commodity contracts and investments0.001 0.01 Insurance carriers and related activities 0.000 0.00 Funds trusts and other financial vehicles 0.000 0.00 Rental and leasing services and lessors of intangible 0.001 assets 0.01 Legal services 0.007 0.27 Computer systems design and related services 0.089 1.19 Miscellaneous professional scientific and technical 0.010 services 0.20 Management of companies and enterprises 0.004 0.13 Administrative and support services 0.006 0.14 Waste management and remediation services 0.000 0.01 Educational services 0.011 0.37 Ambulatory health care services 0.000 0.00 Hospitals Nursing and residential care facilities 0.005 0.13 Social assistance 0.000 0.00 Performing arts spectator sports museums and related 0.000activities 0.01 Amusements gambling and recreation industries 0.000 0.01 Accommodation 0.000 0.00 Food services and drinking places 0.003 0.11 Other services except government 0.041 1.77 Federal General government 0.058 3.50 Federal Government enterprises 0.000 0.01 S&L General Government 0.001 0.04 S&L Government enterprises 0.002 0.06 Computer and peripheral equipment manufacturing 1.471 8.11 Communications equipment manufacturing 1.856 36.60 Semiconductor and other electronic component manufacturing 1.581 12.67 Other electronic products 1.024 24.40 Newspaper; periodical; book publishers 0.002 0.11 Software publishing 0.214 1.20 Real estate 0.000 0.00 Household 0.000 0.00 1995-2000 2000-2007 Contribution Share Contribution Share 0.000 0.001 0.000 0.000 0.003 0.002 0.004 0.145 0.341 0.363 0.338 0.543 0.938 0.649 0.434 0.331 0.367 0.091 0.308 0.039 0.275 0.255 0.051 0.216 0.400 0.179 0.045 0.003 0.001 0.002 0.004 0.007 0.004 0.004 0.000 0.004 0.353 0.186 0.002 0.003 0.000 0.000 0.003 0.018 0.376 0.032 0.011 0.023 0.001 0.036 0.000 0.010 0.000 0.002 0.003 0.000 0.009 0.119 0.131 0.000 0.004 0.004 3.638 6.364 4.423 2.234 0.006 0.555 0.000 0.000 0.00 0.36 0.00 0.04 0.04 0.14 0.08 4.87 10.47 46.62 10.76 23.30 28.52 15.72 13.67 7.12 8.84 7.86 -107.02 -1.20 551.64 27.57 3.30 12.53 11.10 2.89 0.78 0.07 1.84 0.07 0.09 4.25 3.26 0.13 0.00 0.13 3.29 1.43 0.05 0.01 0.00 0.00 0.03 0.66 2.27 0.36 0.30 0.27 0.03 1.09 0.01 -2.14 0.00 0.08 0.08 0.00 0.29 4.21 526.10 0.01 0.13 0.16 12.53 42.92 15.50 145.96 0.13 3.13 0.00 0.00 0.000 0.000 0.000 0.000 0.001 0.000 0.001 0.013 0.054 0.091 0.040 0.044 -0.063 0.040 0.145 0.030 0.077 0.020 -0.023 -0.017 0.042 0.034 0.009 0.027 0.067 0.048 0.010 0.001 0.000 0.000 -0.001 0.001 0.000 -0.001 0.000 0.000 0.097 0.085 0.000 0.000 0.000 0.000 0.001 0.007 0.014 0.009 0.002 0.004 0.000 0.007 0.000 0.004 0.000 0.000 0.000 0.000 0.002 0.025 0.088 0.000 0.001 0.001 -0.062 -0.669 -0.518 0.587 0.001 0.133 0.000 0.000 0.00 -0.02 0.00 0.00 0.02 0.21 1.69 -2.63 -19.59 -13.61 -9.96 -22.17 2.48 15.82 6.86 -3.26 3.43 4.69 0.46 0.15 -2.44 -2.54 0.68 2.66 -24.50 1.72 0.25 0.02 0.02 -0.29 -0.11 -0.35 -0.03 -1.03 0.00 0.03 1.65 0.68 0.01 0.01 0.00 0.00 0.02 0.41 0.40 0.16 0.19 0.17 0.01 0.40 0.00 0.13 0.00 -0.01 -0.03 0.00 0.09 1.51 2.19 -0.02 0.07 0.07 -0.57 15.48 -25.98 23.54 -0.17 1.67 0.00 0.00 DRAFT Note: The contribution is the contribution (in percent) of the use of semiconductor intermediate input to output growth; a contribution is the value share times the growth rate. Share is the share (in percent) of industry output growth accounted for by semiconductor input. Source:Author’s calculations. 32 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Table 6: Contributions to Aggregate Value Added Growth. 1960-2007 Share Growth Farms 0.018 2.589 Forestry fishing and related activities 0.003 2.005 Oil and gas extraction 0.009 -1.661 Mining except oil and gas 0.005 1.917 Support activities for mining 0.002 1.661 Utilities 0.020 1.520 Construction 0.043 0.881 Wood products 0.004 1.416 Nonmetallic mineral products 0.006 1.448 Primary metals 0.011 -1.218 Fabricated metal products 0.015 1.768 Machinery 0.016 2.993 Electrical equipment appliances and components 0.007 2.016 Motor vehicles bodies and trailers and parts 0.014 2.407 Other transportation equipment 0.010 1.206 Furniture and related products 0.004 2.244 Miscellaneous manufacturing 0.005 3.601 Food and beverage and tobacco products 0.017 1.297 Textile mills and textile product mills 0.005 2.677 Apparel and leather and allied products 0.007 -0.353 Paper products 0.007 1.281 Printing and related support activities 0.006 1.847 Petroleum and coal products 0.004 3.649 Chemical products 0.017 2.834 Plastics and rubber products 0.007 3.813 Wholesale Trade 0.048 6.392 Retail Trade 0.060 3.865 Air transportation 0.004 8.338 Rail transportation 0.007 0.573 Water transportation 0.001 5.046 Truck transportation 0.009 3.867 Transit and ground passenger transportation 0.002 0.601 Pipeline transportation 0.001 3.944 Other transportation and support activities 0.006 3.817 Warehousing and storage 0.002 4.948 Motion picture and sound recording industries 0.003 3.231 Broadcasting and telecommunications 0.021 6.522 Information and data processing services 0.002 6.612 Federal Reserve banks credit intermediation and related 0.025 activities3.824 Securities commodity contracts and investments0.007 9.173 Insurance carriers and related activities 0.017 3.217 Funds trusts and other financial vehicles 0.001 -4.649 Rental and leasing services and lessors of intangible 0.008 assets 4.836 Legal services 0.010 2.465 Computer systems design and related services 0.005 7.454 Miscellaneous professional scientific and technical 0.027 services 5.122 Management of companies and enterprises 0.016 2.767 Administrative and support services 0.015 5.206 Waste management and remediation services 0.002 3.734 Educational services 0.007 2.771 Ambulatory health care services 0.024 3.329 Hospitals Nursing and residential care facilities 0.018 2.782 Social assistance 0.003 5.330 Performing arts spectator sports museums and related 0.003activities 3.509 Amusements gambling and recreation industries 0.004 4.062 Accommodation 0.007 4.081 Food services and drinking places 0.014 2.209 Other services except government 0.023 1.553 Federal General government 0.036 0.598 Federal Government enterprises 0.007 1.017 S&L General Government 0.066 2.533 S&L Government enterprises 0.007 1.904 Computer and peripheral equipment manufacturing 0.003 35.348 Communications equipment manufacturing 0.002 4.120 Semiconductor and other electronic component manufacturing 0.004 22.139 Other electronic products 0.005 3.798 Newspaper; periodical; book publishers 0.006 0.044 Software publishing 0.002 21.349 Real estate 0.050 3.342 Household 0.149 4.562 Total 1.000 1995-2000 2000-2007 Contribution Share Growth Contribution Share Growth Contribution 0.04 0.01 -0.02 0.01 0.00 0.03 0.03 0.01 0.01 -0.01 0.03 0.06 0.02 0.04 0.01 0.01 0.02 0.03 0.02 0.01 0.01 0.01 0.01 0.05 0.03 0.31 0.23 0.03 0.00 0.01 0.04 0.00 0.00 0.02 0.01 0.01 0.13 0.02 0.09 0.09 0.05 -0.01 0.04 0.02 0.04 0.14 0.04 0.07 0.01 0.02 0.08 0.04 0.02 0.01 0.01 0.03 0.03 0.04 0.02 0.01 0.16 0.01 0.09 0.01 0.10 0.02 0.00 0.05 0.17 0.68 0.010 0.003 0.005 0.003 0.001 0.019 0.039 0.003 0.005 0.005 0.012 0.011 0.005 0.012 0.006 0.003 0.005 0.014 0.003 0.003 0.006 0.005 0.003 0.017 0.007 0.046 0.053 0.005 0.003 0.001 0.009 0.001 0.001 0.006 0.002 0.003 0.023 0.003 0.029 0.014 0.022 0.001 0.010 0.013 0.009 0.037 0.017 0.024 0.002 0.007 0.031 0.024 0.005 0.004 0.004 0.008 0.014 0.022 0.026 0.007 0.067 0.007 0.003 0.003 0.007 0.005 0.006 0.005 0.050 0.157 6.490 3.966 -7.762 7.514 -3.331 1.524 3.217 1.843 2.968 3.712 2.026 0.150 0.913 1.434 3.896 3.429 5.236 -3.047 1.798 -3.488 0.775 0.447 11.068 0.701 5.351 8.870 6.550 9.359 0.552 1.378 3.346 4.239 2.298 4.466 6.838 2.011 6.011 7.464 1.025 28.566 3.107 -24.640 4.735 1.578 14.686 6.275 2.623 5.248 2.503 2.149 1.567 1.374 4.391 2.502 4.095 4.286 3.441 0.163 -1.183 3.415 1.643 2.221 59.457 4.736 52.787 -3.220 3.895 21.462 2.880 5.458 0.06 0.01 -0.05 0.02 -0.01 0.03 0.12 0.01 0.01 0.02 0.02 0.00 0.00 0.02 0.02 0.01 0.03 -0.05 0.00 -0.01 0.01 0.00 0.04 0.01 0.04 0.42 0.35 0.05 0.00 0.00 0.03 0.01 0.00 0.03 0.01 0.01 0.14 0.03 0.03 0.39 0.07 -0.03 0.05 0.02 0.13 0.24 0.04 0.12 0.01 0.02 0.05 0.03 0.02 0.01 0.02 0.03 0.05 0.00 -0.03 0.02 0.11 0.02 0.20 0.02 0.34 -0.02 0.02 0.09 0.14 0.86 0.008 0.002 0.009 0.003 0.002 0.017 0.044 0.003 0.004 0.004 0.010 0.009 0.004 0.009 0.006 0.003 0.005 0.012 0.002 0.002 0.004 0.004 0.004 0.016 0.005 0.044 0.051 0.004 0.003 0.001 0.009 0.001 0.001 0.006 0.003 0.003 0.022 0.004 0.036 0.014 0.021 0.002 0.009 0.013 0.011 0.040 0.017 0.025 0.002 0.009 0.033 0.026 0.006 0.004 0.004 0.007 0.016 0.021 0.026 0.005 0.068 0.006 0.002 0.002 0.004 0.004 0.006 0.005 0.052 0.162 2.892 1.087 -4.291 -1.674 0.739 2.208 -2.509 0.659 -0.656 -8.741 -0.275 1.156 -0.185 3.359 2.693 -0.467 2.629 0.309 -1.720 -5.554 -2.250 -0.380 -7.790 2.089 -1.679 2.678 5.010 6.645 1.919 4.544 2.689 1.065 4.686 1.596 4.603 1.517 6.033 13.154 3.815 8.403 1.154 -3.540 1.711 0.130 5.116 5.747 -0.379 3.069 -0.651 1.554 4.669 1.664 5.372 2.085 3.308 0.801 2.896 0.302 1.646 -1.930 0.662 0.406 39.297 1.704 12.930 2.054 -2.081 9.825 3.761 5.301 0.03 0.00 -0.04 0.00 0.01 0.04 -0.11 0.00 0.00 -0.04 -0.01 0.01 0.00 0.02 0.02 0.00 0.01 0.00 0.00 -0.01 -0.01 0.00 -0.06 0.03 -0.01 0.12 0.25 0.03 0.01 0.00 0.02 0.00 0.00 0.01 0.01 0.00 0.13 0.06 0.13 0.12 0.02 0.00 0.01 0.00 0.05 0.24 -0.01 0.08 0.00 0.01 0.15 0.04 0.03 0.01 0.01 0.01 0.05 0.01 0.04 -0.01 0.04 0.00 0.07 -0.01 0.05 0.01 -0.01 0.05 0.20 0.86 3.446 1.000 4.519 1.000 DRAFT Note: The share is the industry nominal 33share in aggregate value added. Growth rate is industry value added growth rate and contributiuon is defined as in text as value share times value added growth rate. Source:Author’s calculations. 2.784 Samuels, Jon D. (2012): "Semiconductors and U.S. Economic Growth" Table 7: Contributions to Aggregate Productivity Growth. 1960-2007 Domar Weight Growth Farms 0.042 1.401 Forestry fishing and related activities 0.006 -0.766 Oil and gas extraction 0.017 -2.249 Mining except oil and gas 0.009 0.386 Support activities for mining 0.004 -0.435 Utilities 0.037 -0.519 Construction 0.093 -0.789 Wood products 0.011 0.100 Nonmetallic mineral products 0.013 0.159 Primary metals 0.033 -0.229 Fabricated metal products 0.034 0.306 Machinery 0.037 0.327 Electrical equipment appliances and components 0.017 0.229 Motor vehicles bodies and trailers and parts 0.051 0.362 Other transportation equipment 0.024 0.177 Furniture and related products 0.008 0.458 Miscellaneous manufacturing 0.013 0.959 Food and beverage and tobacco products 0.078 0.036 Textile mills and textile product mills 0.016 1.175 Apparel and leather and allied products 0.018 0.308 Paper products 0.020 0.049 Printing and related support activities 0.011 0.063 Petroleum and coal products 0.029 0.185 Chemical products 0.051 0.056 Plastics and rubber products 0.017 0.470 Wholesale Trade 0.076 1.937 Retail Trade 0.083 1.378 Air transportation 0.010 1.599 Rail transportation 0.010 1.592 Water transportation 0.004 0.675 Truck transportation 0.020 0.762 Transit and ground passenger transportation 0.004 -1.015 Pipeline transportation 0.004 0.525 Other transportation and support activities 0.009 1.068 Warehousing and storage 0.003 1.686 Motion picture and sound recording industries 0.006 0.140 Broadcasting and telecommunications 0.038 1.154 Information and data processing services 0.004 0.004 Federal Reserve banks credit intermediation and related 0.036 activities-1.569 Securities commodity contracts and investments0.012 2.035 Insurance carriers and related activities 0.037 -0.342 Funds trusts and other financial vehicles 0.006 -1.915 Rental and leasing services and lessors of intangible 0.013 assets -2.088 Legal services 0.015 -1.608 Computer systems design and related services 0.006 -1.597 Miscellaneous professional scientific and technical 0.043 services 0.124 Management of companies and enterprises 0.025 -0.354 Administrative and support services 0.024 -0.082 Waste management and remediation services 0.005 0.438 Educational services 0.012 -0.563 Ambulatory health care services 0.032 -1.016 Hospitals Nursing and residential care facilities 0.036 -0.877 Social assistance 0.006 0.389 Performing arts spectator sports museums and related 0.005activities 0.233 Amusements gambling and recreation industries 0.005 0.084 Accommodation 0.010 0.815 Food services and drinking places 0.032 0.050 Other services except government 0.042 -0.403 Federal General government 0.063 0.162 Federal Government enterprises 0.009 -0.239 S&L General Government 0.096 -0.172 S&L Government enterprises 0.015 -0.828 Computer and peripheral equipment manufacturing 0.008 10.774 Communications equipment manufacturing 0.007 0.741 Semiconductor and other electronic component manufacturing 0.010 8.856 Other electronic products 0.014 0.824 Newspaper; periodical; book publishers 0.013 -1.731 Software publishing 0.004 9.006 Real estate 0.066 -0.815 Household 0.149 0.000 Total 1.814 1995-2000 2000-2007 Contribution Domar Weight Growth Contribution Domar Weight Growth Contribution 0.05 0.00 -0.05 0.00 0.00 -0.03 -0.07 0.00 0.00 -0.01 0.01 0.01 0.00 0.02 0.00 0.00 0.01 0.01 0.02 0.00 0.00 0.00 0.00 0.00 0.01 0.15 0.11 0.02 0.02 0.00 0.01 0.00 0.00 0.01 0.00 0.00 0.04 0.01 -0.06 0.06 -0.01 -0.01 -0.03 -0.02 0.00 0.01 -0.01 0.00 0.00 -0.01 -0.03 -0.04 0.00 0.00 0.00 0.01 0.00 -0.02 0.01 0.00 -0.02 -0.01 0.09 0.00 0.10 0.01 -0.02 0.03 -0.05 0.00 0.024 0.006 0.009 0.006 0.003 0.031 0.078 0.010 0.010 0.018 0.027 0.029 0.012 0.048 0.017 0.007 0.012 0.056 0.010 0.008 0.017 0.011 0.018 0.044 0.018 0.072 0.084 0.011 0.005 0.003 0.020 0.003 0.003 0.009 0.003 0.007 0.044 0.006 0.048 0.024 0.040 0.007 0.017 0.017 0.012 0.057 0.027 0.036 0.005 0.013 0.044 0.045 0.008 0.006 0.007 0.012 0.032 0.040 0.045 0.008 0.103 0.015 0.011 0.009 0.015 0.012 0.013 0.008 0.068 0.157 2.605 2.287 -4.451 4.510 -2.514 0.630 -0.926 -0.178 0.114 0.854 -0.356 -1.184 0.246 -0.501 0.305 -0.171 1.344 -1.018 0.865 0.412 0.279 -0.376 1.895 -0.749 0.963 3.354 2.500 0.394 1.199 -0.845 0.426 -0.127 0.803 0.535 2.635 0.350 -1.083 -3.045 -3.842 12.432 0.039 -6.007 -8.065 -1.085 -0.677 -0.054 -0.999 -0.146 1.179 -1.605 -0.544 -0.526 -0.098 -0.640 -1.701 0.404 0.018 -1.011 -0.481 2.338 -0.294 0.117 16.894 0.045 20.874 -3.264 0.153 7.296 0.730 0.000 0.06 0.01 -0.04 0.02 -0.01 0.02 -0.07 0.00 0.00 0.02 -0.01 -0.03 0.00 -0.02 0.01 0.00 0.02 -0.06 0.01 0.00 0.01 0.00 0.04 -0.03 0.02 0.25 0.21 0.00 0.01 0.00 0.01 0.00 0.00 0.00 0.01 0.00 -0.04 -0.02 -0.18 0.30 0.00 -0.04 -0.14 -0.02 -0.01 0.00 -0.03 -0.01 0.01 -0.02 -0.02 -0.02 0.00 0.00 -0.01 0.00 0.00 -0.04 -0.02 0.02 -0.03 0.00 0.19 0.00 0.32 -0.04 0.00 0.05 0.05 0.00 0.020 0.004 0.015 0.005 0.005 0.029 0.084 0.008 0.008 0.014 0.022 0.022 0.009 0.039 0.014 0.006 0.011 0.049 0.006 0.004 0.013 0.008 0.027 0.042 0.015 0.067 0.083 0.010 0.004 0.003 0.018 0.002 0.003 0.009 0.003 0.007 0.050 0.010 0.051 0.025 0.042 0.007 0.019 0.018 0.014 0.069 0.027 0.039 0.005 0.015 0.047 0.045 0.009 0.006 0.007 0.012 0.033 0.040 0.050 0.007 0.107 0.015 0.006 0.006 0.010 0.010 0.012 0.009 0.071 0.162 1.851 -0.557 -4.938 -2.004 -2.722 0.444 -2.394 0.705 -0.101 -1.392 0.427 0.950 0.990 1.383 1.125 0.720 1.586 0.002 1.441 0.979 0.197 0.731 -1.511 0.902 -0.127 0.574 2.594 3.023 1.308 0.323 0.803 -0.704 0.982 1.396 0.628 -0.200 2.396 6.160 0.574 3.442 0.019 -1.267 -2.826 -1.032 2.367 1.597 -2.525 1.225 -0.843 -1.461 0.293 -0.630 1.502 -0.234 0.516 0.423 0.194 -0.220 0.137 -1.433 -0.709 -1.232 14.586 2.117 7.262 1.528 -0.703 5.145 1.470 0.000 0.04 0.00 -0.08 -0.01 -0.01 0.01 -0.21 0.01 0.00 -0.02 0.01 0.02 0.01 0.05 0.02 0.00 0.02 0.00 0.01 0.00 0.00 0.01 -0.08 0.04 0.00 0.04 0.21 0.03 0.01 0.00 0.01 0.00 0.00 0.01 0.00 0.00 0.12 0.06 0.03 0.09 0.00 -0.01 -0.05 -0.02 0.03 0.11 -0.07 0.05 0.00 -0.02 0.01 -0.03 0.01 0.00 0.00 0.00 0.01 -0.01 0.00 -0.01 -0.08 -0.02 0.08 0.00 0.07 0.01 -0.01 0.04 0.11 0.00 0.332 1.757 0.666 1.739 DRAFT Note: Domar weight is value of industry 34 output over aggregate value added. Growth rate is industry TFP growth rate and contributiuon is defined as in text as domar weight times TFP growth rate. Source:Author’s calculations. 0.675