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Information technology and productivity: where are we now and where are we going?

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Author Info

  • Stephen D. Oliner
  • Daniel E. Sichel

Abstract

Productivity growth in the U.S. economy jumped during the second half of the 1990s, a resurgence that many analysts linked to developments in information technology (IT). However, shortly after this consensus emerged, demand for IT products fell sharply, leading to a debate about the connection between IT and productivity and about the sustainability of the faster growth. ; This article contributes to this debate in two ways. First, the authors provide updated estimates of the proximate sources of growth using a growth accounting framework that focuses on information technology. Their results confirm that the acceleration in labor productivity after 1995 was driven by the greater use of IT capital goods and the more rapid efficiency gains in the production of these goods. Second, to assess whether the pickup in productivity growth is sustainable, the authors analyze the steady-state properties of a multisector growth model. This exercise generates a range for labor productivity growth of 2 percent to 2 3/4 percent per year, which suggests that much-and possibly all-of the resurgence is sustainable. ; The analysis also highlights that future increases in output will depend on the pace of technological advance in the semiconductor industry and on the extent to which products embodying these advances diffuse through the economy.

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Bibliographic Info

Article provided by Federal Reserve Bank of Atlanta in its journal Economic Review.

Volume (Year): (2002)
Issue (Month): Q3 ()
Pages: 15-44

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Handle: RePEc:fip:fedaer:y:2002:i:q3:p:15-44:n:v.87no.3

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Keywords: Information technology ; Productivity ; Technology ; Economic development;

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References

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  1. Whelan, Karl, 2002. "Computers, obsolescence, and productivity," Open Access publications from University College Dublin urn:hdl:10197/204, University College Dublin.
  2. Stephen D. Oliner & Daniel E. Sichel, 2000. "The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 3-22, Fall.
  3. Susanto Basu & John G. Fernald & Matthew D. Shapiro, 2001. "Productivity Growth in the 1990s: Technology, Utilization, or Adjustment?," NBER Working Papers 8359, National Bureau of Economic Research, Inc.
  4. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
  5. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
  6. Kiley, Michael T., 2001. "Computers and growth with frictions: aggregate and disaggregate evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 55(1), pages 171-215, December.
  7. Gordon, Robert J, 2002. "Technology and Economic Performance in the American Economy," CEPR Discussion Papers 3213, C.E.P.R. Discussion Papers.
  8. Daniel Aaronson & Daniel Sullivan, 2001. "Growth in worker quality," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 53-74.
  9. Charles Steindel & Kevin Stiroh, 2001. "Productivity: what is it and why do we care about it?," Staff Reports 122, Federal Reserve Bank of New York.
  10. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
  11. Whelan, Karl, 2003. " A Two-Sector Approach to Modeling U.S. NIPA Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 627-56, August.
  12. Robert J. Gordon, 2000. "Does the "New Economy" Measure up to the Great Inventions of the Past?," NBER Working Papers 7833, National Bureau of Economic Research, Inc.
  13. Ho, Mun & Jorgenson, Dale & Stiroh, Kevin, 2002. "Projecting Productivity Growth: Lessons from the U.S. Growth Resurgence," Discussion Papers dp-02-42, Resources For the Future.
  14. Ana Aizcorbe, 2002. "Why are semiconductor prices falling so fast? Industry estimates and implications for productivity measurement," Finance and Economics Discussion Series 2002-20, Board of Governors of the Federal Reserve System (U.S.).
  15. Karl Whelan, 1999. "Tax incentives, material inputs, and the supply curve for capital equipment," Finance and Economics Discussion Series 1999-21, Board of Governors of the Federal Reserve System (U.S.).
  16. Hulten, Charles R, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 511-18, October.
  17. Roberts John M., 2001. "Estimates of the Productivity Trend Using Time-Varying Parameter Techniques," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-32, July.
  18. Mark Doms, 2003. "Communications equipment: what has happened to prices?," Working Papers in Applied Economic Theory 2003-15, Federal Reserve Bank of San Francisco.
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