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Is There a "New Economy" in Ireland?

Listed author(s):
  • Slevin, Geraldine

    (Central Bank and Financial Services Authority of Ireland)

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    This paper reviews the sources of economic growth in Ireland between 1962 and 2000. The purpose of this analysis is to assess if there is a “new economy” in Ireland. The “new economy” phenomenon is reflected in higher productivity growth as a result of technical progress in the Information and Communications Technology (ICT) sector. The consequences of a “new economy” include, among other things, a higher potential output growth rate, higher productivity growth, lower unemployment and improved living standards. At the aggregate level, productivity growth increased from 2.5 per cent per annum between 1990 and 1995 to approximately 4.0 per cent per annum between 1996 and 2000. This step-up in productivity growth would suggest a new era in the Irish economy. A sub-sectoral analysis was undertaken to assess which sectors were significant in accounting for this increase in productivity growth. Productivity growth in the industrial sector averaged 2.7 per cent per annum between 1996 and 2000. Within the industrial sector, the manufacturing sector was a significant contributor to productivity growth. Productivity growth in the manufacturing sector averaged 6.3 per cent per annum between 1995 and 1999. The performance of this sector was primarily driven by the high-tech sector, where productivity growth averaged 5.7 per cent per annum between 1995 and 1999. The results suggest that although there has been a significant step-up in the overall productivity growth rate of the economy, this was primarily related to the high-tech sector, particularly the chemicals sector. The large values of net output per worker in this sector may be the result of transfer pricing and/or high returns to research and development. Thus while there has been a structural change of the economy in recent years, this may represent a sectoral shift of resources from more traditional sectors to high-tech sectors rather than a “new economy” effect.

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    Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 3/RT/02.

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    Length: 34 pages
    Date of creation: Jun 2002
    Handle: RePEc:cbi:wpaper:3/rt/02
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    1. Nicholas Oulton, 2002. "ICT and Productivity Growth in the United Kingdom," Oxford Review of Economic Policy, Oxford University Press, vol. 18(3), pages 363-379.
    2. William D. Nordhaus, 2000. "Alternative Methods for Measuring Productivity Growth," Cowles Foundation Discussion Papers 1282, Cowles Foundation for Research in Economics, Yale University.
    3. Abdelhak Senhadji, 2000. "Sources of Economic Growth: An Extensive Growth Accounting Exercise," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 1-6.
    4. Robert J. Gordon, 2000. "Does the "New Economy" Measure Up to the Great Inventions of the Past?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 49-74, Fall.
    5. Paul Schreyer, 2000. "The Contribution of Information and Communication Technology to Output Growth: A Study of the G7 Countries," OECD Science, Technology and Industry Working Papers 2000/2, OECD Publishing.
    6. John FitzGerald, 2001. "Wage Determination in Economies in Transition: Ireland Spain and Portugal," Papers WP141, Economic and Social Research Institute (ESRI).
    7. William D. Nordhaus, 2002. "Productivity Growth and the New Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 211-265.
    8. John FitzGerald & Ide Kearney, 2000. "Convergence in Living Standards in Ireland: The Role of the New Economy," Papers WP134, Economic and Social Research Institute (ESRI).
    9. Francesco Daveri, "undated". "Is Growth an Information Technology Story in Europe Too?," EPRU Working Paper Series 00-12, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    10. Slevin, Geraldine, 2001. "Potential Output and the Output Gap in Ireland," Research Technical Papers 5/RT/01, Central Bank of Ireland.
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