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Information Technology and Productivity: Where are We Now and
Where are We Going?
Daniel E. Sichel
Stephen D. Oliner
American Enterprise Institute
May 10, 2002
Board of Governors of the Federal Reserve System FEDS 2002-29
Productivity growth in the U.S. economy jumped during the second half of the 1990s, a resurgence that many analysts linked to information technology (IT). However, shortly after this consensus emerged, demand for IT products fell sharply, leading to a lively debate about the connection between IT and productivity and about the sustainability of the faster growth. We contribute to this debate in two ways. First, to assess the robustness of the earlier evidence, we extend the growth-accounting results in Oliner and Sichel (2000a) through 2001. The new results confirm the basic story in our earlier work - that the acceleration in labor productivity after 1995 was driven largely by the greater use of IT capital goods and by the more rapid efficiency gains in the production of IT goods. Second, to assess whether the pickup in productivity growth is sustainable, we analyze the steady-state properties of a multi-sector 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.
Number of Pages in PDF File: 79
Keywords: Productivity, information technology, growth accounting
JEL Classification: D2, E2, O3, O4
working papers series
Date posted: July 28, 2002