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How does information technology improve aggregate productivity? A new channel of productivity dispersion and reallocation

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  • Chun, Hyunbae
  • Kim, Jung-Wook
  • Lee, Jason

Abstract

Using U.S. firm-level data from 1971 to 2000, this paper quantifies the importance of production input reallocation in explaining the information technology (IT) driven productivity growth. We find that cross-industry variation in input reallocation explains more than 30% of differences in the 5-year productivity growth rates of industries utilizing similar levels of IT. Our findings illustrate a new channel through which IT affects the aggregate productive growth and are consistent with recent papers that emphasize the destructive nature of technology innovation and the importance of firm-level reallocation in explaining aggregate productivity growth. Our paper implies that policy makers should focus not only on implementing IT but also on instituting policies aimed at improving reallocation efficiency to maximize the effect of IT on the productivity growth.

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  • Chun, Hyunbae & Kim, Jung-Wook & Lee, Jason, 2015. "How does information technology improve aggregate productivity? A new channel of productivity dispersion and reallocation," Research Policy, Elsevier, vol. 44(5), pages 999-1016.
  • Handle: RePEc:eee:respol:v:44:y:2015:i:5:p:999-1016
    DOI: 10.1016/j.respol.2014.11.007
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    Cited by:

    1. Archawa Paweenawat & Thitima Chucherd & Nakarin Amarase, 2017. "Uncovering Productivity Puzzles in Thailand: Lessons from Microdata," PIER Discussion Papers 73, Puey Ungphakorn Institute for Economic Research, revised Oct 2017.
    2. Fonseca, Tiago & Lima, Francisco & Pereira, Sonia C., 2018. "Understanding productivity dynamics: A task taxonomy approach," Research Policy, Elsevier, vol. 47(1), pages 289-304.
    3. repec:wfo:wstudy:58979 is not listed on IDEAS
    4. Fabio Pieri & Michela Vecchi & Francesco Venturini, 2017. "Modelling the joint impact of R and D and ICT on productivity: A frontier analysis approach," DEM Working Papers 2017/13, Department of Economics and Management.

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