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Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach

Author

Listed:
  • Jeremy Greenwood

    (University of Pennsylvania)

  • Karen A. Kopecky

    (Federal Reserve Bank of Atlanta)

Abstract

The welfare gain to consumers from the introduction of personal computers is estimated here. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero. This implies that the good won't be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated/estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is in the range of 2 to 3 percent of consumption expenditure.

Suggested Citation

  • Jeremy Greenwood & Karen A. Kopecky, 2011. "Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach," RCER Working Papers 559, University of Rochester - Center for Economic Research (RCER).
    • Handle: RePEc:roc:rocher:559
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    References listed on IDEAS

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    Cited by:

    1. Smaranda Pantea & Bertin Martens, 2014. "The Value of the Internet for Consumers," JRC Working Papers on Digital Economy 2014-08, Joint Research Centre.

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    More about this item

    Keywords

    Compensating Variation; Computers; Electricity; Equivalent Variation; Technological Progress; Tornqvist Price Index; Welfare Gain.;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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