New Economy Handbook - Abstract

Chapter 31

Growth and Innovation in the New Economy
K. Stiroh (Federal Reserve Bank of New York)

This paper examines the link between innovation, technical progress, and economic growth. The first part reviews the sources of growth and the role of innovation in neoclassical and endogenous growth models. The second part discusses the recent impact of one major stream of innovations linked to information technology (IT) on the U.S. economy. The empirical evidence from both aggregate and microeconomic level studies suggests that IT played a major role in the resurgence in the growth of U.S. output and productivity after 1995.