Information Technology and Its Impact on Productivity: Firm-Level Evidence from Government and Private Data Sources, 1977-1993

Abstract

This paper examines trends in computer usage and the effect on productivity growth for a cross-industry panel of firms during the period 1977-93. We link firm-level computer asset and financial data from a variety of public and private data sources, including Computer Intelligence (a market research firm), the Census Bureau's Enterprise and Auxiliary Establishment Surveys, and Compustat. We find that computers-especially personal computers-contributed positively to productivity growth and yielded excess returns relative to non-computer capital, providing further evidence refuting the Information Productivity Paradox. These results appear robust with respect to econometric specifications and to choice of data. Moreover, our results suggest that the excess returns from computers first increased and then decreased over our sample period, and reached a peak in 1986 or 1987. In addition, we find evidence that computers are complementary with skilled labor and that they help reduce inventory levels.

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