DP3555 It's Not What You Make, It's How You Use IT: Measuring the Welfare Benefits of the IT Revolution Across Countries

Author(s): Tamim Bayoumi , Markus Haacker

Publication Date: September 2002

Keyword(s): technological change , information technology , terms of trade , welfare benefits

JEL(s): D60 , F43 , O47 , O57

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP3555.asp

This Paper analyses the welfare benefits from falling relative prices of IT (Information Technology) goods across a wide range of countries. Using two separate methodologies and datasets, we find that welfare benefits mainly accrue to users of IT, not their producers, because of falling relative prices. This is important, as IT production and use are highly differentiated across countries, and implies that earlier work on how IT production affects real GDP, while useful in calibrating the overall benefits of the IT revolution, are a less valuable way of assessing the distribution of benefits.