Is the Information Technology Revolution Over?

50 Pages Posted: 1 Aug 2013

See all articles by David M. Byrne

David M. Byrne

Board of Governors of the Federal Reserve System

Stephen D. Oliner

American Enterprise Institute

Daniel E. Sichel

Wellesley College; NBER

Multiple version iconThere are 2 versions of this paper

Date Written: March 15, 2013

Abstract

Given the slowdown in labor productivity growth in the mid-2000s, some have argued that the boost to labor productivity from IT may have run its course. This paper contributes three types of evidence to this debate. First, we show that since 2004, IT has continued to make a significant contribution to labor productivity growth in the United States, though it is no longer providing the boost it did during the productivity resurgence from 1995 to 2004. Second, we present evidence that semiconductor technology, a key ingredient of the IT revolution, has continued to advance at a rapid pace and that the BLS price index for microprocesssors may have substantially understated the rate of decline in prices in recent years. Finally, we develop projections of growth in trend labor productivity in the nonfarm business sector. The baseline projection of about 1¾ percent a year is better than recent history but is still below the long-run average of 2¼ percent. However, we see a reasonable prospect – particularly given the ongoing advance in semiconductors – that the pace of labor productivity growth could rise back up to or exceed the long-run average. While the evidence is far from conclusive, we judge that "No, the IT revolution is not over."

Keywords: Labor productivity, innovation, information technology

JEL Classification: O4, O3

Suggested Citation

Byrne, David M. and Oliner, Stephen D. and Sichel, Daniel E., Is the Information Technology Revolution Over? (March 15, 2013). FEDS Working Paper No. 2013-36. Available at SSRN: https://ssrn.com/abstract=2303780 or http://dx.doi.org/10.2139/ssrn.2303780

David M. Byrne (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Stephen D. Oliner

American Enterprise Institute ( email )

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HOME PAGE: http://www.aei.org/scholar/stephen-d-oliner/

Daniel E. Sichel

Wellesley College ( email )

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NBER ( email )

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