If there is anything empirical -- any actual evidence and analysis -- I would love to see it.
There is tons of it. The following is from a very interesting article by the National Science Foundation exploring both sides of Solow's paradox:
To elaborate, Oliner and Sichel find small but real contributions of computers to the economy. From 1970 to 1992, computer hardware contributed 0.15 percentage points to the total U.S. output growth rate of 2.8 percent. When software and computer-related labor are included, this contribution doubles to 0.31 percentage points for the period 1987 to 1993 (or 11 percent of total growth).[12] Other capital and labor inputs, as well as multifactor productivity gains, account for about 90 percent of the growth in U.S. output during this period.[13] The authors explain the small contribution of computers by observing that computing-related inputs are a very small portion of total capital and labor, and have only recently grown large enough to have a measurable impact. They conclude that "computing equipment can be productive at the firm level and yet make little contribution to agg! regate growth, precisely because computers remain a relatively minor factor of production" (Oliner and Sichel, p. 286). Sichel (1997) expands on this argument by reflecting on trends in the diffusion of a variety of information technologies. He concludes that computing technologies are part of a 150-year trend toward greater information intensity in the United States, and that we should not expect the effects of computers to be large and sudden, but modest and part of a historical continuum.
Brynjolfsson and Hitt (1996) analyzed the impact of IT on marginal output using a new firm-level database and found large contributions of IT to marginal product for the firms in their study. Every additional dollar of computer capital stock was associated with an increase in marginal output of 81 cents, and every additional dollar spent on IT-related labor was associated with an increase in marginal output of $2.62. Their earlier work also demonstrates that firm-level factors account for half of the variability in IT's marginal product contributions (Brynjolfsson and Hitt 1995). In contrast, previous studies indicate that increases in IT are not associated with increases in marginal output; Morrison and Berndt (1990) found a negative relationship between IT spending and marginal output.
The significance of IT emerges in areas of business impact other than conventionally measured productivity gains. Three types of effects are worth particular note: the expansion of banking products and services, time and cost savings, and competitive positioning.
Banking products and services have proliferated with the use of EFT, ATM, telephone transactions, and automated credit and loan procedures. Banks thus process billions of transactions a year-everything from clearing individual checks, to ATM cash dispersal, to account inquiries, to loan approvals-a volume of interactions that would simply not be possible without automation. For example, the Clearinghouse for Interbank Payment Systems was processing nearly $2 trillion worth of transactions per day by the late 1980s, and Visa's capacity for authorizing credit card transactions increased from 30,000 per day in 1978 to 1.4 million per day in 1991 (NRC 1994a, pp. 83-84). Bresnahan (1986) estimates that the benefits to consumers of the use of mainframe computers for financial services was five times greater than the investments in the computers themselves.
The qualitative improvement in customer convenience, ease, and scope of access to financial resources is reflected in the overall growth of electronic transactions. Figure 8-13 illustrates the expansion of electronic (ATM and point-of-sale) transactions in the United States; the number of electronic cash transactions and payments for goods and services was more than 10 billion in 1995, compared to just over 5 billion in 1989.
Time and cost savings for the industry are also notable. For example, Mellon Bank reduced the average processing time of customer complaints by 20 days when it installed an integrated document system; Visa reduced its processing time for electronic credit card authorizations from 5 minutes in 1973 to 1.1 seconds in 1991; and the Bank of Boston reduced its staff requirements by 17 percent and increased its transaction volume by 80 percent when IT allowed the bank to consolidate its mainframe operations (NRC 1994a, pp. 83-84). The American Bankers Association estimates that ATM transactions cost 27 cents compared to $1.07 for a human teller, and telephone transactions cost about $0.35 compared to $1.82 for a phone call processed by bank personnel (Morisi 1996). In a study of 759 banks, Alpar and Kim (1991) found that a 10 percent increase in IT expenses led to a 1.9 percent decrease in total ba! nk costs.
Although the productivity measures do not find a link between banking industry output and IT investments, it is important to note that while the volume of financial transactions has been increasing at a dramatic rate, employment in the sector has been falling. By 1996, employment in the commercial banking industry was 100,000 employees below its historic peak in 1990. During the same period, the number of ATM transactions doubled to more than 10.5 billion.
IT is of value to the banking industry not only for time savings, cost reductions, and customer services, but for the ability to give individual banks a competitive advantage or the ability to maintain a competitive position. Deregulation of the industry in 1980 led to intense rivalry among institutions, and expanding automated services was one way of attracting depositors and customers. Thus Banker and Kauffman's (1988) study of 508 branch banks found that ATMs were essential to maintaining market share and customer base-not necessarily to reducing costs.
nsf.gov |
