(See the picture below for answer the question)1. Exactly how does computer technology increase productivity? How would you show this with a production function?2. Who experiences the gains in productivity growth spawned by computers? How would you measure such gains? A P PLI CATIO N6.5Finding the Computer RevolutionEconomists have intensively studied productivity trends dur-ing the past 50 years in an effort to identify factors that mayhave contributed to improvements. One of the major puz-zles in this research is that productivity growth seems to haveslowed down just as computers were coming into morewidespread usage in the U.S. economy. Table 1 illustratesthis paradox. From 1959 to 1973, average labor productivityincreased at an annual rate of nearly 3 percent per year andtotal factor productivity growth was more than 1 percent peryear. During the following two decades, however, both ratesof productivity increase slowed dramatically. What is oddabout this finding is that these two decades were character-ized by the rapid introduction of computers into practicallyall areas of the economy. Presumably these actions shouldhave increased producteffect caused famous growth theorist Robert Solow to quipthat "you can see the computer age everywhere but in theproductivity statistics."telecommunications, and software). Before 1995, theseindustries contributed, at most, one-quarter of one per-centage point to annual productivity growth. But that fig-ure more than doubled after 1995. Two related factorsseem to have accounted for the increase: (1) a rapiddecline in the price of computer-related equipment, and(2) major investments in such equipment by the informa-tion technology industries. It was not until the late 1990sthat such trends were large enough to appear in the overallstatistics.Will the Trend Continue?Table 1 also suggests that the contribution of computertechnology to productivity growth may have declined inthe new century. There is considerable disagreementamong economists about whether this decline is just a"blip" in a long-term uptrend or a significant sign that theproductivity impact of computers in the workplace has lar-gely ended. Of course, it would not be surprising if computerinputs eventually experienced diminishing returns inproduction. Whether major new technical improvementswill reverse such declines is uncertain at this time.The inability to detectsuchFinally, Computers AppearAfter 1995, productivity performance in the U.S. economyimproved dramatically, and this is where the effect of com-puters began to appear. As Table 1 shows, during 1995–2000, average labor productivity grew at 2.7 percent peryear, and total factor productivity growth returned to itsearlier levels. One major reason for this improvement issuggested by the final line in the table, which indicatesthe importance of total factor productivity gains in infor-mation technology producing industries (computers,Το THNKAβουT1. Exactly how does computer technology increase pro-ductivity? How would you show this with a productionfunction?2. Who experiences the gains in productivity growthspawned by computers? How would you measure suchgains?'In The New York Times Book Review, July 12, 1987, p. 36.TABLE 1U.S. Productivity Growth 1959–2006 (average annual rates)1959–19731973-19951995–20002000-2006Average labor productivityTotal factor productivityTotal factor productivity frominformation technology2.821.492.702.501.140.391.000.920.090.250.580.38Source: Dale W. Jorgenson, Mun S. Ho, and Kevin J. Stiroh, "A Retrospective Look at the U.S. Productivity Growth Resurgence." Journal ofEconomic Perspectives (Winter 2008): 3–24.

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Computer Networking: A Top-Down Approach (7th Edition)

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(See the picture below for answer the question) 1. Exactly how does computer technology increase productivity? How would you show this with a production function? 2. Who experiences the gains in productivity growth spawned by computers? How would you measure such gains?