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The Case of the Missing Productivity Growth: Or, Does Information Technology Explain why Productivity Accelerated in the US but not the UK?

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Author Info
Susanto Basu
John G. Fernald
Nicholas Oulton
Sylaja Srinivasan

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Abstract

We argue that unmeasured investments in intangible organizational capital associated with the role of information and communications technology (ICT) as a general purpose technology' can explain the divergent U.S. and U.K. TFP performance after 1995. GPT stories suggest that measured TFP should rise in ICT-using sectors, perhaps with long lags. Contemporaneously, investments in ICT may in fact be associated with lower TFP as resources are diverted to reorganization and learning. In both the U.S. and U.K., we find a strong correlation between ICT use and industry TFP growth. The U.S. results, in particular, are consistent with GPT stories: the TFP acceleration was located primarily in ICT-using industries and is positively correlated with industry ICT capital growth from the 1980s and early 1990s. Indeed, as GPT stories suggest, controlling for past ICT growth, industry TFP growth appears negatively correlated with increases in ICT capital services in the late 1990s. A somewhat different picture emerges for the U.K. TFP growth does not appear correlated with lagged ICT capital growth. But TFP growth in the late 1990s is strongly and positively associated with the growth of ICT capital services, while being strongly and negatively associated with the growth of ICT investment.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10010.

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Date of creation: Oct 2003
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Handle: RePEc:nbr:nberwo:10010

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Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Evangelia Vourvachaki, 2006. "Information and Communication Technologies in a Multi-Sector Endogenous Growth Model," CEP Discussion Papers dp0750, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  2. Christina Wang & Susanto Basu & John G. Fernald, 2004. "A general-equilibrium asset-pricing approach to the measurement of nominal and real bank output," Working Papers 04-7, Federal Reserve Bank of Boston. [Downloadable!]
    Other versions:
  3. Elena Ketteni & Theofanis P. Mamuneas & Thanasis Stengos, 2007. "Nonlinearities in Economic Growth: A Semiparametric Approach applied to Information Technology data," Working Papers 0701, University of Guelph, Department of Economics. [Downloadable!]
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  4. John Fernald & Shanthi Ramnath, 2004. "The acceleration in U.S. total productivity after 1995: the role of information technology," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 52-67. [Downloadable!]
  5. Benoit Robidoux, 2003. "Future Productivity Growth in Canada: The Role of the Service Sector," International Productivity Monitor, Centre for the Study of Living Standards, vol. 7, pages 58-65, Fall. [Downloadable!]
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