Transatlantic Technologies: the Role of ICT in the Evolution of U.S. And European Productivity Growth

38 Pages Posted: 29 Jun 2020 Last revised: 9 Jun 2021

See all articles by Robert J. Gordon

Robert J. Gordon

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Hassan Sayed

Northwestern University

Date Written: June 2020

Abstract

We examine the role of the ICT revolution in driving productivity growth behavior for the United States and an aggregate of ten Western European nations (the EU-10) from 1977 to 2015. We find that the standard growth accounting approach is deficient when it separates sources of growth between ICT capital deepening and TFP growth, because much of the effect of the ICT revolution was channeled through spillovers to TFP growth rather than being limited to the capital deepening pathway. Using industry-level data from EU KLEMS, we find that most of the 1995-2005 U.S. productivity growth revival was driven by ICT-intensive industries producing market services and computer hardware. In contrast the EU-10 experienced a 1995-2005 growth slowdown due to a paucity of ICT investment, a failure to capture the efficiency benefits of ICT, and performance shortfalls in specific industries including ICT production, finance-insurance, retail-wholesale, and agriculture. After 2005 both the U.S. and the EU-10 suffered a growth slowdown, indicating that the benefits of the ICT revolution were temporary rather than providing a new permanent era of faster productivity growth. This joint transatlantic post-2005 slowdown is consistent with the broader view that ongoing innovation has been less potent in boosting productivity growth compared to earlier decades of the postwar era.

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Suggested Citation

Gordon, Robert J. and Sayed, Hassan, Transatlantic Technologies: the Role of ICT in the Evolution of U.S. And European Productivity Growth (June 2020). NBER Working Paper No. w27425, Available at SSRN: https://ssrn.com/abstract=3637726

Robert J. Gordon (Contact Author)

Northwestern University - Department of Economics ( email )

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Hassan Sayed

Northwestern University ( email )

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