4.4.3 Variables at the State level

This section describes the main variables (output, capital and labor hours) at the state level. Table 4.8 shows averages values of these variables during the period 1977-1997. States are ranked in descending order of IT intensity (IT ratio). The average IT ratio across states varies between less than 4% to almost 13.5%. The District of Columbia is, not surprisingly, the most IT intensive state, followed by New York, New Jersey. Among the top 10 most IT intensive states, 4 states (California, New York, Florida and New Jersey) are some of the 8 states that own more than half of the national stock of IT capital (see Figure 2.9). Furthermore, the District of Columbia, Delaware and Rhode Island own a very small share of the national stock of IT capital, but they are in the top 10 most IT intensive states.

This chapter has described the methodology used in this study to measure the productive capacity of information technology capital. A model measuring the returns to IT capital and its contribution to output and productivity growth was constructed. The variables and data needed for estimation are defined and described in Table 4.9. The next chapter will present the main results of this research

Table 4.7Description of Variables at the Industry Level
Rank	Code	Industry	Output	Totalcapital	ITcapital	Labor hours	IT ratio(%)
1	62	Communications	1.37	3.96	1.62	1.22	41.02
2	106	Motion pictures	0.18	0.15	0.04	0.42	25.25
3	103	Business and Other Services	3.88	1.44	0.33	8.09	19.61
4	7	Wholesale trade	3.36	2.56	0.46	9.29	17.49
5	108	Health services	3.29	0.88	0.15	10.60	15.65
6	109	Legal services	0.80	0.15	0.03	1.24	15.19
7	93	Insurance carriers	0.76	0.83	0.14	2.51	14.53
8	92	Security brokers	0.44	0.08	0.01	0.72	14.04
9	527	Electronic, instrument...	1.44	1.23	0.19	2.78	13.35
10	91	Banking	2.23	2.86	0.40	2.14	11.49
11	96	Holding and investment	0.10	0.25	0.03	0.34	11.35
12	537	Chemicals	1.05	1.55	0.18	2.22	11.21
13	536	Printing & publishing	0.78	0.46	0.05	2.79	11.12
14	94	Insurance agents	0.36	0.06	0.01	1.08	10.34
15	617	Transportation services	0.17	0.27	0.03	0.57	9.34
16	529	Other transport. equipment	0.58	0.45	0.04	2.16	9.24
17	102	Personal services	0.40	0.21	0.02	1.62	8.88
18	526	Industrial machinery	0.99	1.04	0.10	4.48	8.65
19	615	Transportation by air	0.35	0.79	0.05	1.20	5.60
20	612	Local & interurban	0.11	0.19	0.01	0.62	5.47
21	107	Amusement and recreation	0.36	0.35	0.02	1.39	5.24
22	531	Food & kindred products	0.95	1.16	0.06	3.38	4.95
23	523	Stone, clay, glass	0.25	0.41	0.02	1.21	4.77
24	532	Tobacco products	0.34	0.08	0.00	0.12	4.45
25	63	Electric, gas, & sanitary	1.57	7.84	0.36	1.77	4.44
26	538	Petroleum products	0.28	0.77	0.03	0.36	4.35
27	535	Paper products	0.42	0.76	0.03	1.43	3.99
28	105	Misc. repair services	0.18	0.09	0.00	0.51	3.98
29	5210	Misc. manufacturing	0.19	0.12	0.00	0.82	3.96
30	8	Retail trade	5.05	3.57	0.15	24.90	3.78
31	104	Auto repair & parking	0.49	0.70	0.03	1.34	3.70
32	95	Real estate	6.45	8.67	0.35	2.06	3.58
33	534	Apparel & textile	0.25	0.11	0.00	2.23	3.48
34	1010	Educational services	0.41	0.10	0.00	2.35	3.44
35	524	Primary metals	0.44	1.26	0.04	1.79	3.41

Table 4.7(Continued)
Rank	Code	Industry	Output	Totalcapital	ITcapital	Labor hours	IT ratio(%)
36	522	Furniture and fixtures	0.16	0.10	0.00	1.01	2.72
37	613	Trucking and warehousing	0.80	0.73	0.02	2.88	2.62
38	539	Rubber & plastics	0.31	0.37	0.01	1.73	2.48
39	525	Fabricated metals	0.71	0.67	0.02	3.04	2.38
40	33	Oil & gas	0.69	3.12	0.07	1.01	2.38
41	533	Textile mill products	0.22	0.35	0.01	1.52	2.27
42	5310	Leather products	0.05	0.03	0.00	0.34	2.21
43	521	Lumber & wood	0.32	0.27	0.01	1.50	2.11
44	528	Motor vehicles	0.67	0.65	0.01	1.82	2.00
45	614	Water transportation	0.11	0.40	0.01	0.36	1.81
46	101	Hotels & lodging	0.46	0.91	0.01	2.09	1.31
47	611	Railroad transportation	0.19	3.33	0.04	0.67	1.21
48	616	Pipelines, ex. nat. gas	0.06	0.42	0.00	0.04	1.12
49	34	Nonmetalic minerals	0.08	0.18	0.00	0.25	0.89
50	4	Construction	2.30	0.81	0.01	9.16	0.82
51	31	Metal mining	0.04	0.31	0.00	0.15	0.48
52	32	Coal mining	0.11	0.33	0.00	0.38	0.25
Note: Values are averages over 1977-1997. Industries are sorted by descending order of IT intensity (IT ratio)

Table 4.8Description of Variables at the State Level
Rank	State	Output	Total Capital	IT capital	Labor Hours	IT Ratio
1	Dist. of Col.	24.30	23.60	3.31	0.56	13.54
2	New York	430.00	454.00	50.30	10.70	10.73
3	New Jersey	178.00	206.00	21.80	4.64	10.03
4	Colorado	65.10	81.50	8.51	1.74	9.78
5	Massachusetts	136.00	137.00	14.00	3.72	9.68
6	Delaware	17.30	22.60	2.40	0.40	9.63
7	Florida	204.00	230.00	23.50	5.40	9.61
8	Connecticut	81.70	85.90	8.73	2.22	9.56
9	Rhode Island	17.60	17.80	1.77	0.51	9.49
10	California	614.00	672.00	66.30	15.80	9.38
11	Georgia	116.00	143.00	14.60	3.36	9.38
12	Maryland	85.00	94.30	9.29	2.21	9.32
13	Washington	89.80	99.60	9.88	2.50	9.30
14	Virginia	113.00	129.00	12.70	2.87	9.20
15	Missouri	92.80	113.00	10.80	2.70	9.16
16	Vermont	9.10	10.40	0.97	0.26	8.90
17	Hawaii	21.70	25.80	2.38	0.57	8.84
18	Tennessee	82.20	90.30	8.31	2.58	8.73
19	New Hampshire	20.40	22.60	2.11	0.58	8.72
20	South Dakota	10.20	12.70	1.17	0.28	8.63
21	Illinois	246.00	298.00	26.60	6.80	8.61
22	Oregon	50.10	57.50	5.15	1.41	8.47
23	Iowa	46.70	56.60	4.91	1.39	8.39
24	North Carolina	124.00	131.00	11.70	3.49	8.32
25	Alabama	57.90	78.20	6.74	1.79	8.26
26	Arizona	57.80	72.10	6.38	1.56	8.20
27	Minnesota	84.40	102.00	8.69	2.43	8.10
28	Pennsylvania	218.00	273.00	22.60	6.32	8.03
29	Wisconsin	87.20	100.00	8.39	2.62	8.03
30	South Carolina	50.00	63.10	5.34	1.60	8.01
31	Maine	18.00	20.80	1.74	0.55	7.98
32	Ohio	204.00	255.00	20.80	6.02	7.95
33	Michigan	175.00	200.00	15.80	5.01	7.66
34	Kansas	42.60	64.10	5.03	1.21	7.58
35	Indiana	98.30	126.00	9.83	2.95	7.57
36	Arkansas	32.60	45.20	3.52	0.99	7.43
37	Nebraska	25.80	39.90	3.06	0.74	7.33
38	Idaho	14.70	19.50	1.50	0.42	7.30

Table 4.8(Continued)
Rank	State	Output	Total Capital	IT capital	Labor Hours	IT Ratio
39	Texas	334.00	525.00	40.00	8.66	7.22
40	Mississippi	32.80	48.80	3.62	1.01	7.17
41	Utah	26.20	38.00	2.86	0.74	7.11
42	Oklahoma	48.50	76.30	5.41	1.33	7.00
43	Kentucky	60.00	76.20	5.47	1.70	6.92
44	North Dakota	9.22	14.60	1.02	0.25	6.88
45	West Virginia	25.50	45.30	2.83	0.72	6.16
46	New Mexico	23.30	40.00	2.56	0.57	6.14
47	Nevada	26.20	39.30	2.51	0.79	5.95
48	Montana	11.30	20.70	1.22	0.32	5.82
49	Louisiana	82.40	156.00	9.02	2.04	5.69
50	Alaska	17.20	50.00	1.92	0.37	3.85
51	Wyoming	11.40	33.00	1.23	0.27	3.62

Table 4.9Variable Definitions and Sources
Variable	Name	Definition	Data
T	Time	Year indices	t = 1...21 for years = 1977-1997
I	Industry	Industry indices	i = 1...52 for 2-digit SIC = 31-5310
S	State	State indices	s = 1...51 for fips = 01-56
Y	Output	Aggregate Value-added	“Gross Product Originating” BEA
K	Total Capital	Capital Stock, measured as the net wealth stock of nonresidential equipment and structure	“Fixed Reproducible Tangible Wealth” BEA
KIT	Information technology capital	IT capital stock, measured as the stock of Information Processing Equipment	“Fixed Reproducible Tangible Wealth” BEA
KNIT	Traditional or non-IT capital	Capital stock other than Information Processing Equipment	KNIT = K – KIT
IT%	IT ratio	Share of IT capital in total capital	ITP = KIT/K
E	Employment	Number of full-time equivalent employees	GPO from BEA
H	Hours	Average yearly hours (52* average weekly hours)	Bureau of Labor Statistics
L	Labor hours	Total number of hours worked	L = E * H