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Information and communications technology as a general-purpose technology: evidence from U.S industry data

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  • Susanto Basu
  • John Fernald

Abstract

Many people point to information and communications technology (ICT) as the key for understanding the acceleration in productivity in the United States since the mid-1990s. Stories of ICT as a 'general purpose technology' suggest that measured TFP should rise in ICT-using sectors (reflecting either unobserved accumulation of intangible organizational capital, spillovers, or both), but with a long lag. Contemporaneously, however, investments in ICT may be associated with lower TFP as resources are diverted to reorganization and learning. We find that U.S. industry results are consistent with GPT stories: the acceleration after the mid-1990s was broadbased--located primarily in ICT-using industries rather than ICT-producing industries. Furthermore, industry TFP accelerations in the 2000s are positively correlated with (appropriately weighted) industry ICT capital growth in the 1990s. Indeed, as GPT stories would suggest, after controlling for past ICT investment, industry TFP accelerations are negatively correlated with increases in ICT usage in the 2000s.

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Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2006-29.

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Date of creation: 2006
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Handle: RePEc:fip:fedfwp:2006-29

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Keywords: Information technology ; Labor productivity ; Industrial productivity;

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  1. Timothy F. Bresnahan & Manuel Trajtenberg, 1992. "General Purpose Technologies "Engines of Growth?"," NBER Working Papers 4148, National Bureau of Economic Research, Inc.
  2. Bart Hobijn & Boyan Jovanovic, 2000. "The Information Technology Revolution and the Stock Market: Evidence," NBER Working Papers 7684, National Bureau of Economic Research, Inc.
  3. Robert Inklaar & Marcel P. Timmer & Bart van Ark, 2006. "Mind the gap! International comparisons of productivity in services and goods production," Hi-Stat Discussion Paper Series d06-175, Institute of Economic Research, Hitotsubashi University.
  4. Nicholas Oulton & Sylaja Srinivasan, 2005. "Productivity Growth and the Role of ICT in the United Kingdom: An Industry View, 1970-2000," CEP Discussion Papers dp0681, Centre for Economic Performance, LSE.
  5. Hasan Bakhshi & Nicholas Oulton & Jamie Thompson, 2003. "Modelling investment when relative prices are trending: theory and evidence for the United Kingdom," Bank of England working papers 189, Bank of England.
  6. Nicholas Oulton, 2000. "Must the growth rate decline? Baumol's unbalanced growth revisited," Bank of England working papers 107, Bank of England.
  7. Paul David & Gavin Wright, 1999. "General Purpose Technologies and Surges in Productivity: Historical Reflections on the Future of the ICT Revolution," Economics Series Working Papers 1999-W31, University of Oxford, Department of Economics.
  8. Robert Inklaar & Marcel P. Timmer, 2007. "Of Yeast and Mushrooms: Patterns of Industry-Level Productivity Growth," German Economic Review, Verein für Socialpolitik, vol. 8, pages 174-187, 05.
  9. Carol Corrado & Paul Lengermann & Eric J. Bartelsman & J. Joseph Beaulieu, 2007. "Sectoral Productivity in the United States: Recent Developments and the Role of IT," German Economic Review, Verein für Socialpolitik, vol. 8, pages 188-210, 05.
  10. John Laitner & Dmitriy Stolyarov, 2003. "Technological Change and the Stock Market," American Economic Review, American Economic Association, vol. 93(4), pages 1240-1267, September.
  11. Dirk Krueger & Krishna B. Kumar, 2003. "US-Europe Differences in Technology-Driven Growth: Quantifying the Role of Education," NBER Working Papers 10001, National Bureau of Economic Research, Inc.
  12. Carol A. Corrado & Charles R. Hulten & Daniel E. Sichel, 2006. "Intangible Capital and Economic Growth," NBER Working Papers 11948, National Bureau of Economic Research, Inc.
  13. Boyan Jovanovic & Peter L. Rousseau, 2008. "Mergers as Reallocation," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 765-776, November.
  14. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
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