Why Did Semiconductor Price Indexes Fall So Fast in the 1990s? A Decomposition

Economic Inquiry, 2006, vol. 44, issue 3, pages 485-496

Abstract: Price deflators for semiconductors fell rapidly over the 1990s, pulled down by steep declines in the deflator for the microprocessor (MPU) segment that accelerated around 1995. A decomposition of a price index for Intel's MPUs suggests that virtually all of the declines in the price index--and the acceleration--can be attributed to quality increases associated with product innovation, rather than declines in the cost per chip. The sizable decline in Intel's margins from 1993--99 only accounted for about 6 percentage points of the average 24% decline per quarter in the price index and cannot explain the acceleration. (JEL D42, L63, O47) Copyright 2006, Oxford University Press.

JEL-codes: D42 L63 O47 (search for similar items in EconPapers)

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