Technical change, markup, divestiture, and productivity growth in the US telecommunications industry

This paper examines the sources of productivity growth for the U.S. telecom munications industry from 1935 to 1987. These years encompass both the pre- and post-AT&T divestiture periods. We formulate a structural model that ac counts for both changes in the cost and the demand side of the industry. We measure the contributions of aggregate demand, information intensity of th e economy, price-cost margins, relative factor prices, direct and indirect effects of technological progress, and R&D investment on total-factor produ ctivity (TFP) growth rate. We show that TFP growth rate as conventionally m easured is a seriously biased measure of rate of technical change in this i ndustry.