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Has the surge in computer spending fundamentally changed the economy?

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  • Joseph H. Haimowitz

Abstract

The computer sector has been one of the fastest growing segments of the U.S. economy over the past two decades. The dynamic nature of the computer sector and the sector's increased prominence in overall spending in the economy have led some analysts to suggest that the economy is entering a New Era, where the economy will return to the high-growth, low-inflation conditions of the 1950s and 1960s.> Although spending on computers is spread throughout all sectors of the economy, the key channel through which the economy might be transformed is investment spending on computers by businesses. Spending on computers by businesses is key because the contribution of computers to output growth depends crucially on the quantity of computers used in the production process. If rapid spending on computers does lead to faster output growth, then understanding the magnitude of the contribution of computer capital to output growth will be crucial for long-run forecasting and policy analysis.> Haimowitz examines whether computers have fundamentally changed the economy. He finds that computers have had only a modest impact on output growth until now, but the future impact could be larger.

Suggested Citation

  • Joseph H. Haimowitz, 1998. "Has the surge in computer spending fundamentally changed the economy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 27-42.
  • Handle: RePEc:fip:fedker:y:1998:i:qii:p:27-42:n:v.83no.2
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    File URL: http://www.kansascityfed.org/publicat/econrev/pdf/2q98haim.pdf
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    References listed on IDEAS

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    1. Jeremy Greenwood, 1999. "The Third Industrial Revolution," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-12.
    2. 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.
    3. Charles Steindel, 1995. "Chain-weighting: the new approach to measuring GDP," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 1(Dec).
    4. Joel Mokyr, 1997. "Are we living in the middle of an Industrial Revolution?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 31-43.
    5. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
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    Cited by:

    1. Hashmat Khan & Marjorie Santos, 2002. "Contribution of ICT Use to Output and Labour-Productivity Growth in Canada," Staff Working Papers 02-7, Bank of Canada.
    2. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2008. "A Retrospective Look at the U.S. Productivity Growth Resurgence," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 3-24, Winter.
    3. McGuckin, Robert H & Stiroh, Kevin J, 2001. "Do Computers Make Output Harder to Measure?," The Journal of Technology Transfer, Springer, vol. 26(4), pages 295-321, October.
    4. Robert H. McGuckin & Kevin Stiroh, 2000. "Computers and Productivity: Are Aggregation Effects Important?," Economics Program Working Papers 00-03, The Conference Board, Economics Program.

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