IT Adoption Costs and Productivity: A Reply to Diego Comin
Diego Comin (2002, Review of Economic Dynamics 5 (2)), critiques my paper "Technology adoption costs and productivity growth: The transition to information technology" (2002, Review of Economic Dynamics 5 (2)), concluding that all of my major results are unfounded. I contend, to the contrary, that my results hold up against his criticism. My paper analyzes the effect of investment adjustment costs on subsequent productivity growth for manufacturing industries. I find that adjustment costs increased substantially during the late 70's and early 80's and that this increase is associated with increased investment in information technology. I also estimate the effect of these adjustment costs on BLS productivity growth estimates. This analysis uses two datasets, the NBERâ€“CES Manufacturing Industry Database (Bartelsman and Gray, 1996. NBER Working Paper 205) and the BLS Manufacturing Productivity release of April 2001. For the former I calculate productivity growth using a standard Solow residual; for the latter, I use BLS productivity growth estimates. Comin's critique, however, uses a different measure entirely. He introduces a "corrected TFP" measure that I believe is flawed. Most of his critique uses this measure, rather than the standard productivity growth measures I use. As a consequence, most of his criticism is not actually about my paper, but is, instead, about a paper Comin might have written using his measure. And because this measure is flawed, so is this alternative. In addition, he raises criticism of my evidence of a link between information technology (IT) and adjustment costs and of my corrections to BLS productivity estimates. I present additional evidence to address these concerns and to examine the robustness of my results. (Copyright: Elsevier)
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