software.24 Furthermore, the adoption of common standards across the Organisation for Economic Co-operation and Development (OECD) and beyond should also be encouraged. Wider use of standards can improve our knowledge about investments in software in what is a global industry and facilitate the tracking of software outsourcing.25

Developing Constant Quality Price Indexes for Telecommunications

The varying complexity and rates of technical innovation make the contribution of telecommunications equipment to productivity growth a challenge to measure. Current BEA methodologies for making inter-temporal comparisons in price and quality understate true price declines in communications equipment because they do not fully track evolving technological changes.26 While the Producer Price Index has tried to address some of these changes using hedonic techniques, data that consistently identify important current period product characteristics and transaction prices are not yet readily available.27 Research into alternative quality valuation techniques and improved data transparency is required to respond to the technological changes in telecommunications equipment. BEA and other statistical agencies require increased funding to follow evolving trends in the communications arena with more accuracy.

Gauging the Scope of Globalization

Although the offshoring phenomenon—particularly the offshoring of service-sector jobs—is a topic of much currency, the scope of the phenomenon remains to be adequately documented. Despite the media attention, there is relatively little hard information about the causes and impact of offshoring on manufacturing and service-sector employment in the United States or on other related economic and structural developments. A sustained effort to measure the dimensions and implications of offshoring is necessary for informed policy making. The necessary resources should be made available to provide better information both to policy makers and to the general public.

24

David Wasshausen, “A BEA Perspective: Private Fixed Software Investment,” in National Research Council, Software, Growth, and the Future of the U.S. Economy, op. cit.

25

See comments by Dirk Pilat, “What is in the OECD Accounts and How Good is it?” in National Research Council, Software, Growth, and the Future of the U.S. Economy, op. cit.

26

BEA estimated that prices for communications gear fell an average of 3.2 percent per year between 1994 and 2000. Recent analysis by Marc Doms however suggests that communications equipment prices actually fell about 8 to 10 percent over that period. Mark Doms, “Communications Equipment: What Has Happened to Prices?” Federal Reserve Bank of San Francisco Working Paper 2003-15.

27

For additional perspective on the types of technological changes in telecom equipment that, at least conceptually, could be valued in a hedonic model, see Michael Holdway, “Confronting the Challenge of Estimating Constant Quality Price Indexes for Telecommunications Equipment in the Producer Price Index,” Working Paper, Washington, D.C.: Bureau of Economic Analysis, 2002.



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