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Transatlantic Technologies: The Role of ICT in the Evolution of U.S. and European Productivity Growth

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  • Robert J. Gordon
  • Hassan Sayed

Abstract

We examine the role of the ICT revolution in driving productivity growth behavior for the United States and an aggregate of ten Western European nations (the EU-10) from 1977 to 2015. We find that the standard growth accounting approach is deficient when it separates sources of growth between ICT capital deepening and TFP growth, because much of the effect of the ICT revolution was channeled through spillovers to TFP growth rather than being limited to the capital deepening pathway. Using industry-level data from EU KLEMS, we find that most of the 1995-2005 U.S. productivity growth revival was driven by ICT-intensive industries producing market services and computer hardware. In contrast the EU-10 experienced a 1995-2005 growth slowdown due to a paucity of ICT investment, a failure to capture the efficiency benefits of ICT, and performance shortfalls in specific industries including ICT production, finance-insurance, retail-wholesale, and agriculture. After 2005 both the United States and the EU-10 suffered a growth slowdown, indicating that the benefits of the ICT revolution were temporary rather than providing a new permanent era of faster productivity growth.

Suggested Citation

  • Robert J. Gordon & Hassan Sayed, 2020. "Transatlantic Technologies: The Role of ICT in the Evolution of U.S. and European Productivity Growth," International Productivity Monitor, Centre for the Study of Living Standards, vol. 38, pages 50-80, Spring.
    • Handle: RePEc:sls:ipmsls:v:38:y:2020:3
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    Citations

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    Cited by:

    1. Cette, Gilbert & Devillard, Aurélien & Spiezia, Vincenzo, 2021. "The contribution of robots to productivity growth in 30 OECD countries over 1975–2019," Economics Letters, Elsevier, vol. 200(C).
    2. Elstner, Steffen & Grimme, Christian & Kecht, Valentin & Lehmann, Robert, 2022. "The diffusion of technological progress in ICT," European Economic Review, Elsevier, vol. 149(C).
    3. Gilbert Cette & Aurélien Devillard & Vincenzo Spiezia, 2022. "Growth Factors in Developed Countries: A 1960–2019 Growth Accounting Decomposition," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(2), pages 159-185, June.
    4. Wim Naudé, 2023. "Late industrialisation and global value chains under platform capitalism," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(1), pages 91-119, March.
    5. Murciano-Goroff, Raviv & Zhuo, Ran & Greenstein, Shane, 2021. "Hidden software and veiled value creation: Illustrations from server software usage," Research Policy, Elsevier, vol. 50(9).
    6. Ronzon, Tévécia & Iost, Susanne & Philippidis, George, 2022. "An output-based measurement of EU bioeconomy services: Marrying statistics with policy insight," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 290-301.

    More about this item

    Keywords

    Europe; Productivity Growth; ICT; ICT Policy; United States;
    All these keywords.

    JEL classification:

    • O - Economic Development, Innovation, Technological Change, and Growth
    • P - Political Economy and Comparative Economic Systems

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