Growth and Crisis
Edited by Matilde Mas and Robert Stehrer
Chapter 2: Information Technology and US Productivity Growth: Evidence from a Prototype Industry Production Account
* Dale W. Jorgenson, Mun S. Ho and Jon D. Samuels 2.1 INTRODUCTION The computer equipment manufacturing industry comprised only 0.3 per cent of US value-added from 1960 to 2007, but generated 2.7 per cent of economic growth and 25 per cent of productivity growth. By comparison, agriculture accounted for 1.8 per cent of US value-added, but only 1.0 per cent of economic growth during this period. This reflects the fact that agriculture has grown more slowly than the US economy, while the computer industry has grown 13 times as fast. However, agriculture accounted for 15 per cent of US productivity growth, indicating a very significant role for agricultural innovation. The great preponderance of economic growth in the US involves the replication of existing technologies through investment in equipment and software and expansion of the labour force. Replication generates economic growth with no increase in productivity. Productivity growth is the key economic indicator of innovation. This innovation accounts for less than 12 per cent of US economic growth, despite its importance in industries like computers and agriculture. Although innovation contributes only a modest portion of growth, this is vital to long-term gains in the US standard of living. The predominant role of replication of existing technologies in US economic growth is crucial to the formulation of economic policy. As the US economy recovers from the Great Recession of 2007–09, economic policy must focus on maintaining the growth of employment and reviving investment. Policies that concentrate on enhancing the rate of...
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