Computers and Productivity Growth

Computers and Productivity Growth

            According to the Office of the Chief Economist of the US Department of Labor the US has the highest productivity growth in the world.  In their paper, Generating Productivity Growth: Review of the Role of Workplace Practices and Computers, the years from1960 to 1970 posted an average growth of 2.9%.  In 1973 onwards the productivity growth rate slowed down but remained at 1.1%.  In a study done in 1996 by economists Sandra Black and Lisa Lynch, they listed computers coming in 4th with a 5.45% share in the factors that raise labor productivity.  Similarly, Erik Brynjolfsson of the MT Sloan School of Management and Lorin Hitt of the Wharton School of the University of Pennsylvania, “find that computers have a large positive impact on the productivity of firms.”  Karl Whelan in his paper for the Federal Reserve finds investment in computer equipment and technology together with the high use of them are factors that have sped up the growth of labor productivity.  From 1992 to 1998 computer prices went down and this made businesses avail of technological advances of both hardware and software.  This development greatly improved the central functions of business in communications, quality management, inventory control and faster coordination through the internet.  The US economy showed an impressive performance in productivity with a 2.2% growth in 1996 to 1998 in the private business sector which, for Whelan, is “a rate of advance not seen late into expansion since the 1960s.”

            Whether this growth in productivity will continue remains to be seen.  Professor Paul Allan David of the Stanford Institute for Economic Policy Research says that while computers may to a certain, significant extent impact the productivity of a country there are many other things to consider in the equation like “capital investments, structural adjustment, reorganization and training.”  Professor David added that growth is not to be expected at the front end of the transition.  For Whelan the surge in productivity is not an element of a cycle.  There is no cause to think that the next time there would be a decline in productivity growth.

References

Brynjolfsson, E. and Hitt, L.M. (2003, June). Comparing Productivity: Firm-Level Evidence.

     Retrieved April 8, 2009 from http://www.ebusiness.mit.edu/research/papers/

Samson, M.R. (2001). Bright Ideas: Boosting Productivity with Digital Technology.

     Asian Development Bank.  Retrieved April 8, 2009, from

     http://www.adb.org/Documents/Periodicals/ADB_Review/2001/vol33_1/Boost_Prod.asp

US Dept. of Labor. (1996, September 10).  Generating Productivity Growth: A Review of the

      Role Workplace Practices and Computers.  Office of the Chief Economist.  Retrieved

     April 8, 2009, from http://www.dol.gov/oasam/programs/history/reich/reports/grow.htm

Whelan, Karl. (2000). Computers, Obsolescence, and Productivity. Federal Reserve Board.

     Retrieved April 8, 2009 from http://www/federalreserve.gov/pubs/feds

 

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