The IT Revolution: Is It Evident in the Productivity Numbers?

FRB Richmond Economic Quarterly, Vol. 86, No. 4, Fall 2000, pp. 49-78

30 Pages Posted: 28 Nov 2012

See all articles by Andreas Hornstein

Andreas Hornstein

Federal Reserve Bank of Richmond

Per Krusell

Princeton University - Department of Economics; Stockholm University - Institute for International Economic Studies (IIES); Centre for Economic Policy Research (CEPR)

Date Written: 2000

Abstract

The recent boom in information technology (IT) provides a useful backdrop against which to consider the methodology of productivity accounting. The standard methodology introduced by Robert Solow permits the isolation of total factor productivity (TFP) and its disaggregated sectoral components, but it fails to offer a framework for understanding how the individual factor-specific productivities (FSPs) of particular inputs of capital and labor have evolved. The Solowian procedure thus leaves unexplained the changes in relative factor productivities that naturally tend to occur during technological revolutions like the recent IT boom. To overcome this deficiency, analysts have developed new measures to identify the specific productivities of labor and capital inputs. These measures, combined with a structural-equilibrium interpretation of the economy, are consistent with the IT-driven technological change experienced since the mid-1970s.

Suggested Citation

Hornstein, Andreas and Krusell, Per L., The IT Revolution: Is It Evident in the Productivity Numbers? (2000). FRB Richmond Economic Quarterly, Vol. 86, No. 4, Fall 2000, pp. 49-78. Available at SSRN: https://ssrn.com/abstract=2126615

Andreas Hornstein (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8266 (Phone)
804-697-8255 (Fax)

Per L. Krusell

Princeton University - Department of Economics ( email )

111 Fisher Hall
Princeton, NJ
United States
609-258-4003 (Phone)
609-258-6419 (Fax)

HOME PAGE: http://rincewind.iies.su.se/%7Ekrusell/

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden
+46 0 8 16 30 73 (Phone)
+46 0 8 16 41 77 (Fax)

HOME PAGE: http://rincewind.iies.su.se/%7Ekrusell/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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