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Computing Productivity: Firm-Level Evidence

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  • Brynjolfsson, Erik
  • Hitt, Lorin M.

Abstract

We explore the effect of computerization on productivity and output growth using data from 527 large US firms over 1987-1994. We find that computerization makes a contribution to measured productivity and output growth in the short term (using one year differences) that is consistent with normal returns to computer investments. However, the productivity and output contributions associated with computerization are up to five times greater over long periods (using five to seven year differences). The results suggest that the observed contribution of computerization is accompanied by relatively large and time-consuming investments in complementary inputs, such as organizational capital, that may be omitted in conventional calculations of productivity. The large long-run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s.

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File URL: http://hdl.handle.net/1721.1/5417
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Bibliographic Info

Paper provided by Massachusetts Institute of Technology (MIT), Sloan School of Management in its series Working papers with number 4210-01.

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Date of creation: 09 Jul 2004
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Handle: RePEc:mit:sloanp:5417

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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA
Phone: 617-253-2659
Web page: http://mitsloan.mit.edu/
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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA

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