The meeting was extremely useful as we collectively came up with a broad project plan where we defined the particular thesis deliverables and goals we need to complete by the given date. The project plan can be seen below.
Over the coming weeks I will post up a more detailed project plan which will list the weekly milestones and deliverables I wish to achieve.
Additionally the meeting provided each of with greater clarity regarding the description and requirements of our project. In the sections below I have briefly outline the background to the problem and the specific sections which my project will be focusing on.
Problem Overview: Information Technology and Productivity
An extensive amount of literature has been written on the impact that information technology has on productivity. A measure of this impact can be represented by the following general mathematical representation:
- Is the relationship between IT and its impact on productivity significant
- What are the specific factors that enhance this relationship
The papers that I listed on my post on June the 7th provided numerous explanations and potential hypothesis as an explanation for this phenomenon. I will give an overview of these papers later on in the week.
- Finding a good quality measure of IT
- Measurement issues regarding both output and input variables in terms of adjustments for factors such as inflation etc.
- Issues regarding the measurement of complementary factors of IT
Finding a good quality measure of IT
IT can enhance the productivity of firm by two means. Firstly IT can be used as tool by acting as a substitute to manual labour and introducing automation. For instance, Brynjolfsson & Yang (1996) highlighted that, this particular use of IT is wide spread in the manufacturing sector where IT has automated a lot of processes such as ordering and has lead labour to become redundant in some instances. Secondly it can act as an enabler by adding value to a firms’ business process. For instance in the financial services industry (where I have experience in), I have observed that IT can add value to a business processes in various ways such as allowing profitable clients to be identified form their trading activities and thereby allowing more tailored client services to directed towards their needs.
Measurement issues regarding both output and input variables
- Labour savings
- Better customer service
- Faster response time
- Greater product variety
- Improved quality
The majority of this are intangible items are very difficult measure in terms of the impact it would have on overall output of a firm and as these cannot be measured and we would essentially be omitting them from our data set once again we would be faced with biased estimators and incorrect inferences being drawn from the hypothesis tests.
Issues regarding the measurement of complementary factors of IT
Link between my thesis and the problem
Using data from the Australian Bureau of Statistics (ABS), measures are available for the first two that is hardware and software but not for the last two. Essentially what my thesis will aim to show whether an aggregation error exists and if hardware and software essentially add to the notation of a productivity paradox. Hence it will focus on showing how two of the four explanations provided by Brynjolfsson & Yang (1996): the existence of measurement error and lags due to learning and adjustment that It causes, contribute to the productivity paradox. To illustrate that software and hardware are not substitutes, that is not interchangeable for each other but complements, I will need to employ the Allen partial elasticity of Substitution (AES).
Aims for next week:
Aims for next week:
- Obtain further reading material
- Start to learn and develop skills using R
- Investigate AES