43 Pages Posted: 8 Oct 2003
Date Written: June 2003
We explore the effect of computerization on productivity and output growth using data from 527 large US firms over 1987-1994. We find that computerization makes a contribution to measured productivity and output growth in the short term (using one year differences) that is consistent with normal returns to computer investments. However, the productivity and output contributions associated with computerization are up to five times greater over long periods (using five to seven year differences). The results suggest that the observed contribution of computerization is accompanied by relatively large and time-consuming investments in complementary inputs, such as organizational capital, that may be omitted in conventional calculations of productivity. The large long-run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s.
Suggested Citation: Suggested Citation
Brynjolfsson, Erik and Hitt, Lorin M., Computing Productivity: Firm-Level Evidence (June 2003). MIT Sloan Working Paper No. 4210-01. Available at SSRN: https://ssrn.com/abstract=290325 or http://dx.doi.org/10.2139/ssrn.290325
By Sanghoon Ahn