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General Purpose Technologies and Productivity Surges: Historical Reflections on the Future of the ICT Revolution

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  • Paul A. David

    (All Souls College & Stanford University)

  • Gavin Wright

    (All Souls College & Stanford University)

Abstract

Presented to the International Symposium on ECONOMIC CHALLENGES OF THE 21ST CENTURY IN HISTORICAL PERSPECTIVE, Oxford, England, 2nd-4th July, 1999 Celebrating the Scholarly Career of Charles H. Feinstein, FBA. Re- examination of early twentieth century American productivity growth experience sheds light on the general phenomenon of recurring prolonged swings in total factor productivity (TFP) growth rate experienced in the advanced industrial economies. After a “productivity slowdown” lasting more than a quarter of a century (during which TFP for in the manufacturing sector grew at less than 1 percent per annum, industrial TFP surged to average 6 percent per annum during 1919-29. This contributed substantially to the absolute and relative rise of the US domestic economy’s TFP residual, and in many respects it may be seen as the opening of the high-growth era that persisted into the 1970s. The productivity surge marked the culminating phase in the diffusion of “the dynamo” as a general purpose technology (GPT); that saw a shift in the underlying technological regime brought about by the implementation of critical engineering and organizational advances originating in some two decades earlier. Closer analysis reveals the significant concurrence of the factory electrification movement in this period with important structural changes that were taking place in US labor markets; in addition, there were significant complementarities between managerial and organizational innovations and the new dynamo-based factory technology, on the one hand, and, and the reinforcement of both kinds of innovation by the macroeconomic conditions of the 1920s. This more complicated, historical view of the dynamics of GPT diffusion is supported by comparisons of the US experience of factory electrification with the developments taking place in Japanese industry during the 1920’s, and in the UK manufacturing sector during the 1930’s. Concluding sections of the paper reflect on the analogies and contrasts between the historical case of a socio-economic regime transition involving the electric dynamo and the modern experience of the information and communications technology (ICT) revolution. Our formulation the GPT concept in explicitly historical terms contributes to explaining the paradoxical phenomenon of the late twentieth century productivity slowdown in the US. It also points to some contemporary portents of a future phase of more rapid ICT-based growth in total factor productivity.

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Bibliographic Info

Paper provided by EconWPA in its series Economic History with number 0502002.

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Length: 42 pages
Date of creation: 10 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpeh:0502002

Note: Type of Document - pdf; pages: 42
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Web page: http://128.118.178.162

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References

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  1. Paul A. David & Gavin Wright, 2005. "Early Twentieth Century Productivity Growth Dynamics: An Inquiry into the Economic History of “Our Ignorance”," Macroeconomics 0502023, EconWPA.
  2. Claudia Goldin & Lawrence F. Katz, 1996. "The Origins of Technology-Skill Complementarity," NBER Working Papers 5657, National Bureau of Economic Research, Inc.
  3. Robert J. Gordon, 1999. "U.S. Economic Growth since 1870: One Big Wave?," American Economic Review, American Economic Association, vol. 89(2), pages 123-128, May.
  4. David, P.A., 1989. "Computer And Dynamo: The Modern Productivity Paradox In A Not-Too Distant Mirror," The Warwick Economics Research Paper Series (TWERPS) 339, University of Warwick, Department of Economics.
  5. Feinstein, Charles H. & Temin, Peter & Toniolo, Gianni, 1997. "The European Economy Between the Wars," OUP Catalogue, Oxford University Press, number 9780198774815.
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Cited by:
  1. Edquist, Harald & Henrekson, Magnus, 2004. "Technological Breakthroughs and Productivity Growth," Working Paper Series in Economics and Finance 0562, Stockholm School of Economics, revised 04 Apr 2005.
  2. repec:ebl:ecbull:v:15:y:2006:i:7:p:1-8 is not listed on IDEAS
  3. Koski, Heli & Kretschmer, Tobias, 2010. "New product development and firm value in mobile handset production," Information Economics and Policy, Elsevier, vol. 22(1), pages 42-50, March.
  4. Bronwyn H. Hall & Manuel Trajtenberg, 2004. "Uncovering GPTS with Patent Data," NBER Working Papers 10901, National Bureau of Economic Research, Inc.
  5. Lionel Nesta & Francesco Nicolli & Francesco Vona, 2012. "Determinants of renewable energy innovation: environmental policies vs. market regulation," Sciences Po publications 2012-05, Sciences Po.
  6. Kenneth Carlaw & Richard Lipsey, 2011. "Sustained endogenous growth driven by structured and evolving general purpose technologies," Journal of Evolutionary Economics, Springer, vol. 21(4), pages 563-593, October.

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