Accounting for Growth from A to Z: Review Article on Information Technology and the American Growth Resurgence

The author reviews the book Information Technology and the American Growth Resurgence by Dale Jorgenson, Mun Ho, and Kevin Stiroh, which provides a detailed analysis of the remarkable rebound in productivity and output growth in the last decade. He notes that the book can be considered a “Users’ Guide” to growth accounting and is highly recommended in this regard. The author reviews in an even-handed manner the critiques that have been put forward of the growth accounting methodology presented by Jorgenson et al. His bottom line is that while many of the critiques make valuable points, there is currently no alternative methodology to growth accounting that offers such a comprehensive framework for assessing the sources of economic growth. He also reviews the story put forward by Jorgenson et al. where in the mid-1990s the constant-quality prices of semiconductors fell substantially, leading to rapid declines in the price of Information Technology (IT) capital goods. Firms responded by substituting capital purchases toward IT capital, resulting in a surge in IT capital deepening and labour productivity growth. One limitation of the book is that it provides no analysis of the post-2000 US productivity growth acceleration, which has taken place in a period when rapid IT capital deepening was not occurring.