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Information technology and productivity: where are we now and where are we going?

  • Stephen D. Oliner
  • Daniel E. Sichel

Productivity growth in the U.S. economy jumped during the second half of the 1990s, a resurgence that many analysts linked to developments in information technology (IT). However, shortly after this consensus emerged, demand for IT products fell sharply, leading to a debate about the connection between IT and productivity and about the sustainability of the faster growth. ; This article contributes to this debate in two ways. First, the authors provide updated estimates of the proximate sources of growth using a growth accounting framework that focuses on information technology. Their results confirm that the acceleration in labor productivity after 1995 was driven by the greater use of IT capital goods and the more rapid efficiency gains in the production of these goods. Second, to assess whether the pickup in productivity growth is sustainable, the authors analyze the steady-state properties of a multisector growth model. This exercise generates a range for labor productivity growth of 2 percent to 2 3/4 percent per year, which suggests that much-and possibly all-of the resurgence is sustainable. ; The analysis also highlights that future increases in output will depend on the pace of technological advance in the semiconductor industry and on the extent to which products embodying these advances diffuse through the economy.

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Article provided by Federal Reserve Bank of Atlanta in its journal Economic Review.

Volume (Year): (2002)
Issue (Month): Q3 ()
Pages: 15-44

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Handle: RePEc:fip:fedaer:y:2002:i:q3:p:15-44:n:v.87no.3
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  1. Daniel Aaronson & Daniel Sullivan, 2001. "Growth in worker quality," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 53-74.
  2. Stephen D. Oliner & Daniel E. Sichel, 2000. "The resurgence of growth in the late 1990s: is information technology the story?," Proceedings, Federal Reserve Bank of San Francisco.
  3. Robert J. Gordon, 2002. "Technology and Economic Performance in the American Economy," NBER Working Papers 8771, National Bureau of Economic Research, Inc.
  4. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
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  6. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2006. "Projecting Productivity Growth: Lessons from the US Growth Resurgence," Chapters, in: The New Economy and Beyond, chapter 2 Edward Elgar.
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  9. Susanto Basu & John G. Fernald & Matthew D. Shapiro, 2001. "Productivity Growth in the 1990s: Technology, Utilization, or Adjustment?," NBER Working Papers 8359, National Bureau of Economic Research, Inc.
  10. Karl Whelan, 2002. "Computers, Obsolescence, And Productivity," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 445-461, August.
  11. John M. Roberts, 2001. "Estimates of the productivity trend using time-varying parameter techniques," Finance and Economics Discussion Series 2001-08, Board of Governors of the Federal Reserve System (U.S.).
  12. Hulten, Charles R, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 511-18, October.
  13. Karl Whelan, 1999. "Tax incentives, material inputs, and the supply curve for capital equipment," Finance and Economics Discussion Series 1999-21, Board of Governors of the Federal Reserve System (U.S.).
  14. Charles Steindel & Kevin Stiroh, 2001. "Productivity: what is it and why do we care about it?," Staff Reports 122, Federal Reserve Bank of New York.
  15. Kiley, Michael T., 2001. "Computers and growth with frictions: aggregate and disaggregate evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 55(1), pages 171-215, December.
  16. Whelan, Karl, 2003. " A Two-Sector Approach to Modeling U.S. NIPA Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 627-56, August.
  17. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
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