The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?

Abstract

T he performance of the U.S. economy over the past several years has been nothing short of remarkable. From 1995 through 1999, real gross domestic product rose at an annual rate of more than 4 percent (based on annual average data), a notable step-up from the pace during the first four years of this expansion . The rapid advance in recent years has been driven by a rebound in the growth of labor productivity. In the nonfarm business sector-the part of the economy on which productivity studies typically focus-output per labor hour rose at about a 2 1 ⁄2 percent annual rate between 1995 and 1999, nearly double the average pace of the preceding 25 years. Determining the source of this resurgence ranks among the key issues now facing economists.An obvious candidate is the high-tech revolution spreading through the U.S. business sector. In an effort to reduce costs, to coordinate large-scale operations, and to provide new or enhanced services, American firms have been investing in information technology at a furious pace. Indeed, business investment in computers and peripheral equipment, measured in real terms, jumped more than four-fold between 1995 and 1999. Outlays have also risen briskly for software and communication equipment, which are crucial components of computer networks.We first examined the link between computers and growth in Oliner and Sichel (1994). At that time, many observers were wondering why productivity growth had failed to revive despite the billions of dollars that U.S. companies had poured into information technology over the preceding decade. We concluded that, in fact, there was no puzzle-just unrealistic expectations. Using a standard neoclassical growth accounting framework, we showed that computers should not

Regional economic development in Europe: the role of total factor productivity

“…3. This decomposition, for example, has been instrumental for the analysis of the information and communication technology (ICT) revolution (Jorgenson & Stiroh, 2000;Oliner & Sichel, 2000), the rapid growth of East Asian economies (Hsieh, 2002;Young, 1995), and the productivity gap between Europe and the United States (van Ark, O'Mahony, & Timmer, 2008 Acemoglu and Dell (2010) and Gennaioli et al (2013), this should not have a major impact on the analysis. 8.…”

The effects of ICT⁎ on output per worker: A study of the Chinese economy

“…Pohjola (2002) considers a sample of 43 countries from 1985 to 1999 and finds no statistically significant correlation between ICT investment and economic growth. 4 At a country level, studies that support Tech-LG hypothesis include Jorgenson and Stiroh (2000), Jorgenson (2001), and Oliner and Sichel (2000) for the United States of America (US); Oulton (2002) for the United Kingdom (UK); Jalava andPohjola (2002, 2008) for Finland; Daveri (2002) for European Union (EU) economies; Jorgenson and Motohashi (2005) for Japan ;Jorgenson (2003) for the G-7 economies; Jorgenson and Vu (2007) for 110 countries; Kuppusamy, Raman, and Lee (2009) The Tech-LG hypothesis is also examined at firm-industry level. At a firm level, Lehr and Lichtenberg (1999) examine firms in service industries in Canada and find personal computers made a positive contribution to productivity growth.…”

Recent Developments in the Theory of Very Long Run Growth: A Historical Appraisal

“…Crafts (2004) has recently assessed the contribution of steam technology to labour productivity growth using the accounting framework of Oliner and Sichel (2000), which includes the effects of capital deepening as well as TFP growth. The results are shown in Table 9, with separate calculations for stationary steam engines, railways and steamships.…”