Information resources in U.S. manufacturing: A reassessment

Abstract

Previous production function studies analysing the use of information inputs in U.S. manufacturing seem to indicate their large underuse and, implicitly, advocate a policy of increased investment in such inputs. In the present study the degree of underuse of information inputs is reassessed by using techniques similar to those applied in the earlier studies and by using more comprehensive and appropriate alternative methods, i.e. estimating translog functions via the systems approach. By expressing all inputs in monetary terms, comparable marginal (value) products for all factors of production are obtained. The results prove to be highly sensitive to the changes in methodology. The degree of underuse of information inputs seems to have been overstated by previous authors. Our results are likely to be more reliable than previous findings because of the reductions in simultaneity and specification bias which the systems approach entails. Finally, we can say little about policy implications. To assess whether a strategy of increased investment in information inputs should be pursued would require detailed analysis of the supply and demand conditions of these inputs, and of the efficiency of information resource use.