Wednesday, November 7, 2007
The full presentation can be accessed at: Treatise Presentation 2007 - SaveFile.com project
I would like to thank everyone that was involved in the entire process from my supervisors Dr. Simon Poon and Dr. Rafael Calvo to my friends and family. It has been an incredibly rewarding and memorable experience where I learned a lot both academically and personally. My hardwork has also payed off as next Monday Iw ill be meeting with Dr.Poon to refine my treatise to be in a journal format so the findings can be published for both the School of Information Technologies and also in information system journals. Thankyou and Goodbye.
Wednesday, October 31, 2007
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 D. Pilat and A. Wolfl, "ICT production and ICT use: What role in aggregate productivity growth," OECD Publication Service, 2004.
 H. T. Wagner and T. Weitzel, "Towards an IT production function: understanding routines as fundament of IT value creation," Journal Of Information Systems, 2007.
 M. Haynes and S. Thompson, "The Productivity Impact of IT Deployment: An Empirical Evaluation of ATM Introduction," Oxford Bulletin of Economics and Statistics, vol. 62, pp. 607-619, 2000.
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Tuesday, October 30, 2007
I was planning on handing it in yesterday and attending the practice presentation that Dr.Calvo had assigned but an urgent personal matter had come up so I was not able to do either. I am very happy with the final quality of work which I have produced all up it was around 16,000-17,000 of quality writing. In the next few days I will be putting the final touches on my presentation in addition to studying for my final econometrics exam which happens to be the day after. As a result my final post will be on Tuesday evening of November 6th after my exam and presentaiton has been completed.
An overview of the contributions and achievements that my treatise has made are as follows:
The research problem undertaken was to explore the complementarities that the IT capital components of software and hardware capital exhibit with each other and other capital investments, as well as investigate their impact on productivity in an intensive IT using economy. This area has not yet been fully been explored by existing academia and will therefore broaden the knowledge and understating into this area for researchers, economists and businesses.
This treatise whilst a research treatise has provided some notable contributions which are:
1. One of the first papers to empirically model and prove that software capital and hardware capital are distinct capital components in production i.e. that hardware and software cannot be aggregated with each other nor with non-IT capital.
2. One of the first papers to apply the economic theory of complementarity and substitutability through the Allen Partial Elasticity Substitution (AES) measure to Australian data in IT productivity analysis.
3. The first paper to employ the AES framework using disaggregated IT capital i.e. software capital and hardware capital in IT productivity analysis
4. This treatise is also one of the first papers to provide evidence for the Australian economy not leveraging the entire benefits to be gained for IT investments and therefore in some respect indicate that Australia is an inefficient user of IT especially for software capital.
Sunday, October 21, 2007
I have now completed all sections of thesis bar the data gathering chapter since it was the easiest to complete and have left it till the very end. I should be able to complete the write up of the data construction within the next hour or so. On Monday I will then incorporate any feedback received form Dr. Poon which I have not yet incorporated and fix up minor details such as the aesthetics of the appearance, table of context, abstract etc. I will then meet with Dr. Poon on Tuesday who will overview my thesis in its entirety and double check that I have not excluded any crucial sections. Hopefully, I will only have to make very minimal changes if any. I plan to have the feedback finalised and incorporate into my thesis by Friday so on Saturday I can bind my thesis and concentrate on my presentation.
In my next post I will provide the an outline of the final structure of my thesis including a list of all th references I have used for any interested readers reference.
Wednesday, October 10, 2007
- R. Boucekkine, D. De La Croix, and O. Licandrom, "Vintage Capital."
- R. G. Lipsey, C. Bekar, and K. Carlaw, "What Requires Explanation?," in General Purpose Technologies and Economic Growth, E. Helpman, Ed. Massachusetts: MIT Press, 1998.
- R. G. Lipsey, C. Bekar, and K. Carlaw, "The consequences of Changes in GPTs," in General Purpose Technologies and Economic Growth, E. Helpman, Ed. Massachusetts: The MIT Press, 1998.
Monday, October 8, 2007
- Lehr, B and Lichtenberg, F., "Information Technology and its impact on productivity: firm level evidence form government and private data sources, 1977-1993", The Canadian Journal of Economics, (1999)
In my last meeting with Dr.Poon we had started discussing on which angle to take in writing up the final copy of the treatise. He suggested that I take a highly exploratory tone in writing up my argument about the results I have found. To recap these results are:
- IT capital can't be aggreagted into Ordinary Capital K (K)
- Software Capital (SK) and Hardware Capital (HK) can't be aggregated into IT capital (K1)
- SK and HK don't have any short term intermediate impact i.e. it takes times for SK and HK to adjust for the effects of these to be felt
- HK and SK are complementary with each other
- SK and L are substitutes with each other
- HK and L are substitutes with each other
For my meeting this afternoon I have created an outline of all the sections including what will be written and what papers will be used for each chapter. Dr. Poon will then review the key points and papers which once approved I can write up the section in its entirety. The sections are as follows:
- Chapter 1: Introduction and Motivation
- Chapter 2: Literature Reivew
- Chapter 3: Methodology and Hypothesis
- Chapter 4: Data Construction
- Chpater 5: Results
- Chapter 6: Analysis and Interpretation
- Chpater 7: Conclusion
After my meeting today I will recount about the derlivarables on the coming week and mention any changes to the proposed structure. I have also been researching further items on two more concepts which are the emobdiment and disembodiment of IT and the General Purpose Technologuy (GPT) nature of IT. Both these concepts will be used in my motivation as well as be used in my analysis and discussion of results. I will provide the references to the resoue which I have used and found in my next post.
Wednesday, September 26, 2007
The code that I wrote to perform the aggregation tests is quite simple and is provided below.
*Read in the Data
SAMPLE 1 216
READ(AggregationData89_06.txt) Sector KH KS K1 K KSITP KSP KHP K0 L VA / SKIPLINES=1
GENR KSP = LOG(KSP)
GENR KHP = LOG(KHP)
GENR KSITP = LOG(KSITP)
*Create time effect dummies
* Run OLS for first aggregation test
OLS VA L K KSP KHP Sector C2-C18
*Perform the t-tests for the implied values
* Run OLS for the second aggregation test
OLS VA L K0 KSITP K1 Sector C2-C18
*Perform t-test for the implied value
As is evident in the code above I had run the OLS by also using the natural log of the mix functions KSP (KS/K), KHP (KH/K) and KSITP (KS/K1). However, this provided an unexpected result in the first aggregation test with the p-value of the mix function KSP to be around 0.70 which means that since we cannot reject the null hypothesis from KSP being statistically different from zero this implies that KS (Software capital) can be aggregated into ordinary capital. I have passed on these results to Dr. Poon who has asked me to re-run the tests without taking the natural logs of these mix functions. The results now show that Software Capital (KS) and Hardware Capital (KH) cannot be aggregated with non-IT capital since the p-values of the mix functions KSP, KHP are less than 0.05. Likewise the second aggregation test results show that KS and KH cannot be aggregated into a single IT capital measure (K1) since the mix function KSITP has a p-value less than 0.01. The full results are posted below.
Test for aggregation of KS into K
TEST VALUE = 0.25394E-01 STD. ERROR OF TEST VALUE 0.12112E-01
T STATISTIC = 2.0966614 WITH 193 D.F. P-VALUE= 0.03733
F STATISTIC = 4.3959891 WITH 1 AND 193 D.F. P-VALUE= 0.03733
WALD CHI-SQUARE STATISTIC = 4.3959891 WITH 1 D.F. P-VALUE= 0.03602
Test for aggregation of KH into KTEST VALUE = 0.78809E-02 STD. ERROR OF TEST VALUE 0.33973E-02
T STATISTIC = 2.3197322 WITH 193 D.F. P-VALUE= 0.02140
F STATISTIC = 5.3811575 WITH 1 AND 193 D.F. P-VALUE= 0.02140
WALD CHI-SQUARE STATISTIC = 5.3811575 WITH 1 D.F. P-VALUE= 0.02036
Test for aggregation of KS into K1
TEST VALUE = -0.18831 STD. ERROR OF TEST VALUE 0.23904E-01
T STATISTIC = -7.8779472 WITH 193 D.F. P-VALUE= 0.00000
F STATISTIC = 62.062051 WITH 1 AND 193 D.F. P-VALUE= 0.00000
WALD CHI-SQUARE STATISTIC = 62.062051 WITH 1 D.F. P-VALUE= 0.00000
I have passed on these results to Dr.Poon and am awaiting confirmation that I can report these results in my final report.
Tuesday, September 25, 2007
- If software and hardware capital can be aggregated into a single measure called IT capital
- If software, hardware and non-IT capital can be aggregated into a single capital measure
In either situation these separate capital items can be aggregated if they are perfect substitutes for each other and i.e. implies that the composition of these different capital measures are not important as the different components can be perfectly replaced by another component. E.g. if software capital and hardware capital can be aggregated into IT capital, IT capital would give the same result if it was 100% software capital, 50% hardware capital and 50% software capital etc. The first aggregation test, tests to see if the concepts of hardware and software capital are different. The second aggregation test tests to see if the concept of IT capital is different from the standard definition of ordinary capital.
The models to estimate are as follows:
KS is software capital
KH is hardware capital
L is labour
K1 is KS+KH, i.e. IT capital
K0 is non-IT capital
K is K0+KS+KH, aggregate capital
T, I control for time and sector effects
Initially I had used a restricted F-test on both models in accordance with Aizcorbe (1990) who proposed the aggregation test to see if these variables can be aggregate. A rejection of the null hypothesis of the restricted f-test means they are not aggregates and I rejected the null in both cases. However, Dr. Poon has asked me to calculate the implied gamma and delta values in addition to each variables p-value. Whilst it is simple to calculate the implied values by dividing b2 or b3 by b0 the p-value is more difficult since we don’t know the standard error of the implied value obtained by division. Dr. Poon said that we will work on this tomorrow in our meeting using some of the inbuilt functions in shazam as I have not found a function in R that will assist in calculating the p-value.
However, I might be able to determine the p-value of the implied coefficient via the following procedure. First I will run a regression of the proportional variable on the dependent variable:
Second, I will then use the fitted value obtained as a replacement for the regressor of the original model and re-run the regression.
Now not only will I have and estimate of the delta value as well as its standard error and will now be able to calculate the p-vale. However, I am not too sure if this will be valid as the implied value of delta should be obtained by the procedure I mentioned earlier. Nevertheless I will ask Dr.Poon if this procedure can be used in tomorrows meeting. After my meeting I will post up the details of which procedure was used to obtain the p-values of the implied delta and gamma values.
Monday, September 17, 2007
- Software Capital and Hardware Capital
- Software Capital and Labour
- Hardware Capital and Labour
cut off. I have included it again in its entirety in this post.
My meeting last week with Dr.Poon provided further clarity for the way going forward as to which data set is going to be used for the final AES results calculation and interpretation. In my last post I mentioned that data could be possibly modified by omitting an industry or removing outliers from the sample via an examination of the regression residuals. However Dr. Poon and I decided against either method owing to the fact the data has been obtained from the ABS. Thus, we do not expect there to be any observations that would adversely influence our results which could be expected in a case where we would have collected the data ourselves via surveys and other sources. Dr.Poon has also provided a data set for years form 2002-2006. Therefore the AES calculations and analysis is going to be conducted on the data from 1989-2006 across 12 industries.
I have included the results obtained for the regression, AES calculation for Software Capital and Hardware Capital (SKHK), Software Capital and Labout (SKL) and Hardware Capital and Labour (HKL) and the descriptive statistics of the AES calculated below.
REGRESSION RESULTS 1989-2002
AES RESULTS 1989-2002
The results show that only software capital and hardware capital are complements, whereas the relationship between these components and labour are substitutes. Whilst the first results are expected the latter are not so much, since I hypothesised that a complementary relationship exists between software capital and labour and hardware capital and labour. However, the are in agreement with previous studies and I am currently finding more papers and material that can offer a robust explanation for the results encountered.
In my pervious post I also mentioned that I am conducting test for the aggregation of software capital and hardware capital into a single measure of IT capital. I have performed the test in accordance with the procedure outline by Aizcorbe (1990) and have rejected the null hypothesis that the two can be aggregated which was expected. This once again provides further evidence to investigate the relationship between these two capital inputs which was done via the AES calculation. Dr.Poon has also asked me to perform this test to test whether there can be a single measure of capital i.e. other capital and IT capital aggregated into one measure. I am yet to perform this test but will do so tomorrow and like the other test I expect to reject the null hypothesis that one single measure of capital can be used.
Once I complete this I only need to estimate to minor models which Dr. Poon will provide details about in my next meeting and all that is left is to finish the write up of my treatise which I have ample time to complete.