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Resolving the productivity paradox

Author

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  • Carlaw, Kenneth I.
  • Oxley, Les

Abstract

Solow [R. Solow, We’d Better Watch out, New York Times Book Review, 1987, p. 36] made the statement that ‘we see computers everywhere except in the productivity statistics’. This has come to be known as the “productivity paradox”. Whether this is in fact a paradox or a direct implication of the diffusion of technical change is the focus of this paper. In particular, the implications of two different theoretical treatments of technology diffusion in an economy are considered; the traditional model of [R. Solow, A contribution to the theory of economic growth, Q. J. Econ., 70 (1956) 65–94] and the alternative view of [R.G. Lipsey, K.I. Carlaw, C.T. Bekar, Economic Transformations: General Purpose Technologies and Long Term Economic Growth, Oxford University Press, Oxford, 2005]. These two distinct views articulate two general empirically testable hypotheses that are captured in a number of specific tests including measures of the diffusion of information and communication technologies (ICT). Although weak, the evidence supports the view of [R.G. Lipsey, K.I. Carlaw, C.T. Bekar, Economic Transformations: General Purpose Technologies and Long Term Economic Growth, Oxford University Press, Oxford, 2005].

Suggested Citation

  • Carlaw, Kenneth I. & Oxley, Les, 2008. "Resolving the productivity paradox," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 78(2), pages 313-318.
  • Handle: RePEc:eee:matcom:v:78:y:2008:i:2:p:313-318
    DOI: 10.1016/j.matcom.2008.01.029
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    References listed on IDEAS

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    1. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-361, May.
    2. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-980, September.
    3. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 2000. "The role of investment-specific technological change in the business cycle," European Economic Review, Elsevier, vol. 44(1), pages 91-115, January.
    4. repec:adr:anecst:y:1998:i:49-50 is not listed on IDEAS
    5. Kenneth I. Carlaw & Richard G. Lipsey, 2006. "Gpt-Driven, Endogenous Growth," Economic Journal, Royal Economic Society, vol. 116(508), pages 155-174, January.
    6. repec:adr:anecst:y:1998:i:49-50:p:02 is not listed on IDEAS
    7. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    8. Philippe Aghion & Peter Howitt, 1999. "On the Macroeconomic Effects of Major Technological Change," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 25, pages 15-32.
    9. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-362, June.
    10. Lipsey, Richard G. & Carlaw, Kenneth I. & Bekar, Clifford T., 2005. "Economic Transformations: General Purpose Technologies and Long-Term Economic Growth," OUP Catalogue, Oxford University Press, number 9780199290895.
    11. Jorgenson, Dale W., 1966. "The Embodiment Hypothesis," Scholarly Articles 3403063, Harvard University Department of Economics.
    12. Kenneth Carlaw & Stephen Kosempel, 2004. "The sources of total factor productivity growth: Evidence from Canadian data," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(4), pages 299-309.
    13. Dale W. Jorgenson, 1966. "The Embodiment Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 74, pages 1-1.
    14. Richard Lipsey & Kenneth Carlaw, 2004. "Total factor productivity and the measurement of technological change," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 1118-1150, November.
    15. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
    16. Carlaw, Kenneth I. & Lipsey, Richard G., 2002. "Externalities, technological complementarities and sustained economic growth," Research Policy, Elsevier, vol. 31(8-9), pages 1305-1315, December.
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    Cited by:

    1. Vladimir D. Matveenk, 2011. "Interests of Social Groups, Direction of Technical Progress, and Barriers to Development: How Sustainable is the World Economic Growth?," DEGIT Conference Papers c016_047, DEGIT, Dynamics, Economic Growth, and International Trade.
    2. Liao, Hailin & Wang, Bin & Li, Baibing & Weyman-Jones, Tom, 2016. "ICT as a general-purpose technology: The productivity of ICT in the United States revisited," Information Economics and Policy, Elsevier, vol. 36(C), pages 10-25.

    More about this item

    Keywords

    Productivity; General purpose technologies; ICTs;

    JEL classification:

    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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