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The Productivity J-Curve: How Intangibles Complement General Purpose Technologies

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  • Erik Brynjolfsson
  • Daniel Rock
  • Chad Syverson

Abstract

General purpose technologies (GPTs) like AI enable and require significant complementary investments. These investments are often intangible and poorly measured in national accounts. We develop a model that shows how this can lead to underestimation of productivity growth in a new GPTs early years and, later, when the benefits of intangible investments are harvested, productivity growth overestimation. We call this phenomenon the Productivity J-curve. We apply our method to US data and find that adjusting for intangibles related to computer hardware and software yields a TFP level that is 15.9 percent higher than official measures by the end of 2017.

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  • Erik Brynjolfsson & Daniel Rock & Chad Syverson, 2021. "The Productivity J-Curve: How Intangibles Complement General Purpose Technologies," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(1), pages 333-372, January.
    • Handle: RePEc:aea:aejmac:v:13:y:2021:i:1:p:333-72
    DOI: 10.1257/mac.20180386
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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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