Essays on the economic consequences of information technology investment

My dissertation addresses the impact of information technology (IT) investment on productivity growth and production structure.; Chapter I examines two different types of adjustment costs in IT investment---quantity expansion cost and technology adoption cost---and their impacts on productivity growth in U.S. manufacturing industries from 1983 to 1998. Estimating a dynamic factor demand model, I find that an additional one dollar investment in IT causes on average 35 cents of adjustment costs, of which 25 cents is due to quantity expansion and 9 cents is due to technology adoption. In particular, the technology adoption cost increases significantly in the late 1990s because of a rapid increase in the technological gap of IT. Decomposition of total factor productivity (TFP) growth, however, reveals that the presence of adjustment costs in IT investment causes a modest bias in TFP growth.; Chapter II examines the degree of substitution between IT and other inputs in U.S. industries from 1984 to 1999. The empirical results based on the Morishima elasticity show that IT is a substitute for labor, non-IT equipment, and structures, while IT and intermediate inputs are substitutes when IT price changes but complements when intermediate inputs price changes. Focusing on manufacturing industries with different types of intermediate inputs, I find that IT is a substitute for purchased services and energy, while IT is a substitute for other materials when IT price changes but a complement when the price of other materials changes.; Chapter III investigates IT externalities in U.S. industries using interindustry transaction in input-output tables from 1984 to 2000. The empirical results show that computerization of an industry's customer and supplier industries reduces both labor and material costs of the industry. Moreover, cost savings driven by supplier industries are larger than those driven by customer industries. I also find that industries in the services sector enjoy more benefits from IT spillovers than industries in other sectors. Decomposition of TFP suggests that IT externalities can explain considerable parts of TFP growth.