COMPUTERS, PRODUCTIVITY, AND INPUT SUBSTITUTION

This paper examines the relationship between computers and economic growth using U.S. sectoral data from 1947 to 1991 to show strong multifactor productivity growth that reflects the fundamental technological progress behind the computer revolution.

Abstract

This paper examines the relationship between computers and economic growth using U.S. sectoral data from 1947 to 1991. The computer‐producing sector shows strong multi‐factor productivity growth that reflects the fundamental technological progress behind the computer revolution. Although aggregate multi‐factor productivity remains low, the computer‐producing sector made a substantial contribution to its modest revival in the 1980s. In sharp contrast, computer‐using sectors show little multi‐factor productivity growth since 1973. For these sectors, the computer revolution is largely a story of traditional input substitution, investment and rapid capital accumulation with little evidence that computer investment affects multifactor productivity. (JEL O30, O47)