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Does the "New Economy" Measure Up to the Great Inventions of the Past?

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  • Robert J. Gordon

Abstract

During the four years 1995-99 U.S. productivity growth experienced a strong revival and achieved growth rates exceeding that of the "golden age" of 1913-72. Accordingly many observers have declared the "New Economy" to be an Industrial Revolution even more important than the Second Industrial Revolution of 1860-1900, which made the golden age of productivity growth possible. This paper dissects the recent productivity revival, subtracts out a cyclical component, and concludes that there is no revival of the productivity growth trend in the 88 percent of the private economy lying outside of the durables manufacturing sector. The paper explains this surprising finding by pointing to limitations in computers and the internet in comparison with the great inventions of the past.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.14.4.49
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 14 (2000)
Issue (Month): 4 (Fall)
Pages: 49-74

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Handle: RePEc:aea:jecper:v:14:y:2000:i:4:p:49-74

Note: DOI: 10.1257/jep.14.4.49
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  1. Erik Brynjolfsson & Loren Hitt & Shinkyu Yang, 2002. "Intangible Assets: How the Interaction of Computers and Organizational Structure Affects Stock Market Valuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 137-198.
  2. Susanto Basu, 1995. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," NBER Working Papers 5336, National Bureau of Economic Research, Inc.
  3. Robert J. Gordon, 2000. "Interpreting the "One Big Wave" in U.S. Long-Term Productivity Growth," NBER Working Papers 7752, National Bureau of Economic Research, Inc.
  4. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
  5. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
  6. Dudley, L., 1996. "Communication and Economic Growth," Cahiers de recherche 9620, Centre interuniversitaire de recherche en ├ęconomie quantitative, CIREQ.
  7. Robert J. Gordon, 1993. "The Jobless Recovery: Does It Signal a New Era of Productivity-led Growth?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 271-316.
  8. Robert J. Gordon, 1999. "U.S. Economic Growth since 1870: One Big Wave?," American Economic Review, American Economic Association, vol. 89(2), pages 123-128, May.
  9. Thor Hultgren, 1960. "Changes in Labor Cost During Cycles in Production and Business," NBER Books, National Bureau of Economic Research, Inc, number hult60-1, May.
  10. Daniel S. Hamermesh & Sharon M. Oster, 1998. "Tools or Toys? The Impact of High Technology on Scholarly Productivity," NBER Working Papers 6761, National Bureau of Economic Research, Inc.
  11. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557.
  12. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-61, May.
  13. Robert J. Gordon, 1998. "Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 297-346.
  14. Erik Brynjolfsson & Lorin Hitt, 1996. "Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending," Management Science, INFORMS, vol. 42(4), pages 541-558, April.
  15. Alan Greenspan, 1999. "The American economy in a world context," Proceedings 637, Federal Reserve Bank of Chicago.
  16. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538.
  17. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter.
  18. Stiroh, Kevin J, 1998. "Computers, Productivity, and Input Substitution," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 175-91, April.
  19. Bresnahan, Timothy F. & Gordon, Robert J. (ed.), 1997. "The Economics of New Goods," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226074153.
  20. Joel Mokyr, 1997. "Are we living in the middle of an Industrial Revolution?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 31-43.
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