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Information and communications technology as a general purpose technology: evidence from U.S. industry data

  • Susanto Basu
  • John G. Fernald

Many people point to information and communications technology (ICT) as the key for understanding the acceleration in productivity in the United States since the mid-1990s. Stories of ICT as a general purpose technology (GPT) suggest that measured total factor productivity (TFP) should rise in ICT-using sectors (reflecting either unobserved accumulation of intangible organizational capital, spillovers, or both), but with a long lag. Contemporaneously, however, investments in ICT may be associated with lower TFP as resources are diverted to reorganization and learning. We find that U.S. industry results are consistent with GPT stories: the acceleration after the mid-1990s was broad-based—located primarily in ICT-using industries rather than ICT-producing industries. Furthermore, industry TFP accelerations in the 2000s are positively correlated with (appropriately weighted) industry ICT capital growth in the 1990s. Indeed, as GPT stories would suggest, after controlling for past ICT investment, industry TFP accelerations are negatively correlated with increases in ICT usage in the 2000s.

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

Volume (Year): (2008)
Issue (Month): ()
Pages: 1-15

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Handle: RePEc:fip:fedfer:y:2008:p:1-15
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