Preliminary: Please Do Not Quote

of Economic Analysis Fellowship and by a sabbatical leave from Rensselaer Polytechnic Institute. I thank the Bureau of Economic Analysis and the University of Maryland-College Park for hosting the project in its early stages. Beth Jolles, Jackie Kliem, and John Rydning of IDC, Framingham, Massachusetts, assisted with IDC data on disk drives and personal computers that I use in this paper. Using worldwide data from 1996-2010, this paper studies the causes of rapid quality improvement in disk drives. During this period storage capacity per drive increased by 375 times for desktop PCs and by 236 times for laptop PCs, where the capacity increase in mobile drives is understated by the miniaturization of laptops. Thus the price per Gigabyte (GB) of storage falls by a factor of 1304 in 2005 $ for desktops and slightly more, by a factor of 1413 for laptops. By the end of 2010 price per GB is less than 1/1300 of the price at the start of 1996. Demand pull from firm size in disk drives and market size in personal computers; the organization of the industry; and technology push from exogenously growing stocks of knowledge contribute to quality improvement. Consistent with this the empirical analysis finds so far that firm size in disk drives and market size in personal computers (PCs), as well as technology push measured by stocks of patents i