aer_hubbard_ResearchPaper - Information, Decisions, and...

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Information, Decisions, and Productivity: On-Board Computers and Capacity Utilization in Trucking By T HOMAS N. H UBBARD * Productivity reflects not only how efficiently inputs are transformed into outputs, but also how well information is applied to resource allocation decisions. This paper examines how information technology has affected capacity utilization in the truck- ing industry. Estimates for 1997 indicate that advanced on-board computers (OBCs) have increased capacity utilization among adopting trucks by 13 percent. These increases are higher than for 1992, suggesting lags in the returns to adoption, and are highly skewed across hauls. The 1997 estimates imply that OBCs have enabled 3-percent higher capacity utilization in the industry, which translates to billions of dollars of annual benefits. ( JEL D24, L92, O33, O47) Theoretical links between economic perfor- mance and the use of information, such as those in F. A. Hayek’s (1945) famous analysis of eco- nomic organization, are at the core of a recurring theme in the productivity literature: the premise that information technology (IT) offers oppor- tunities for large productivity gains. Empirical evidence showing links between IT diffusion and productivity has been scarce until recently, however. 1 Researchers in the field refer to this as “the productivity paradox.” The difficulty of finding relationships between IT use and produc- tivity using aggregate data is well-summarized by Robert Solow’s oft-cited observation: “You can see the computer age everywhere except in the productivity statistics.” This paper examines micro-level empirical relationships between IT use and productivity in the trucking industry in the 1990’s. Productivity in this industry, as elsewhere in the economy, depends critically on how well information is brought to bear on resource allocation deci- sions. 2 Supply and demand conditions change constantly; forecasting exactly when and where trucks will be available and exactly when and where shippers will demand service is difficult more than a few hours in advance. Information about trucks’ availability and value in different uses is highly dispersed, and communication costs create situations where the individuals de- ciding how individual trucks should be used— usually, dispatchers—do not have good information about trucks’ availability. Trucks are not always allocated to their most valuable use as a consequence. Poor matches between capacity and demands lead to underutilization in the form of idle trucks and partially full or empty trailers. Using truck-level data collected by the U.S. Bureau of the Census, I examine how on-board computer (OBC) use has affected capacity uti- lization. OBCs help managers at trucking firms or divisions monitor trucks and drivers. Low- end devices—trip recorders—make truck driv- ers’ activities more contractible and help mechanics diagnose engine problems. High-end * Graduate School of Business, University of Chicago, 1101 East 58th Street, Chicago, IL 60637, and NBER (e- mail: I would like to
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aer_hubbard_ResearchPaper - Information, Decisions, and...

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