Working Paper: CEPR ID: DP3555
Authors: Tamim Bayoumi; Markus Haacker
Abstract: 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.
Keywords: Information Technology; Technological Change; Terms of Trade; Welfare Benefits
JEL Codes: D60; F43; O47; O57
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Falling relative prices of IT goods (D49) | Significant welfare benefits for consumers (D18) |
| Falling relative prices of IT goods (D49) | Social savings across countries (O57) |
| IT production (L86) | Real GDP (E20) |
| Real GDP (E20) | Welfare benefits (I38) |
| IT production (L86) | Welfare benefits (I38) |
| Falling IT prices (D49) | Domestic demand (R22) |