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Chapter 5 Information Technology and Productivity Growth
Across Countries and Sectors The extraordinary success of the U.S. economy and the parallel growth slowdown of the large European countries and Japan in the 1990s bear a simple rationale. The United States has eventually bene- fited from the effective adoption of information technologies (IT). The introduction of the newly installed IT capital has not enhanced aggregate capital accumulation and TFP growth in Europe and Japan. At least on impact, IT capital has mainly displaced existing capital and methods of production rather than supplementing them. The limited growth-enhancing effects from information technologies in countries other than the United States have occurred in the IT-producing sectors, whereas the IT-using industries have contributed the bulk of productivity gains in the United States. The spread of production and use of information technologies in the economy is often associated with productivity gains. This was seemingly the case in the Unites States in the second half of the 1990s, but much less so in the other G- 7 countries. This chapter documents evidence on the sources of the U.S. success and the other countries’ failures. |