Abstract

During the four years 1995-99 U. S. productivity growth experienced a strong revival and achieved growth rates exceeding that of the "golden age" of 1913-72. Accordingly many observers have declared the "New Economy" (the Internet and the accompanying acceleration of technical change in computers and telecommunications) to be an Industrial Revolution equal in importance, or even more important, than the Second Industrial Revolution of 1860-1900 which gave us electricity, motor and air transport, motion pictures, radio, indoor plumbing, and made the golden age of productivity growth possible. This paper raises doubts about the validity of this comparison with the Great Inventions of the past. It dissects the recent productivity revival and separates the revival of 1.35 percentage points (comparing 1995-99 with 1972-95) into 0.54 of an unsustainable cyclical effect and 0.81 points of acceleration in trend growth. The entire trend acceleration is attributed to faster multi-factor productivity (MFP) growth in the durable manufacturing sector, consisting of computers, peripherals, telecommunications, and other types of durables. There is no revival of productivity growth in the 88 percent of the private economy lying outside of durables; in fact when the contribution of massive investment in computers in the nondurable economy is subtracted, MFP growth outside of durables has actually decelerated.

Citations

247	A Theory of the Allocation of Time - Becker - 1965
175	Paradox lost? Firm-level evidence on the returns to information systems spending - Brynjolfsson, Hitt - 1996
120	The time-varying nairu and its implications for economic policy - Gordon - 1997
107	The Measurement of Durable Goods Prices - Gordon - 1990
103	The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox." The American Economic Review 80(2 - David - 1990
86	Procyclical Productivity: Increasing Returns or Cyclical Utilization?” Quarterly - Basu - 1996
84	Raising the Speed Limit - Jorgenson, Stiroh - 2000
80	Understanding Digital Markets: Review and Assessment - Smith, Bailey, et al. - 2000
77	The Explanation of Productivity Change - Jorgenson, Griliches - 1967
71	Labor as a Quasi-fixed Factor - Oi - 1962
52	The Resurgence of Growth in the Late 1990s: Is Information Technology the Story - Oliner, Sichel - 2000
49	Has the ' New Economy' Rendered the Productivity Slowdown Obsolete - Gordon - 1999
40	The Computer Revolution: An Economic Perspective - Sichel - 1997
38	The Health of Nations: The Contribution of Improved Health to Living Standards - Nordhaus - 2003
36	The Contribution of Information Technology to Consumer Welfare - Brynjolfsson - 1996
30	The Economics of New Goods - Gordon
26	Do real-output and real-wage measures capture reality? The history of lighting suggests not. Cowles Foundation Paper - Nordhaus - 1997
22	The High-Pressure U.S - Katz, Krueger - 1999
21	The Sources of Economic Growth in the United States and the Alternatives Before Us - Denison - 1962
13	Intangible Assets: How the Interaction of Computers and Organizational Structure Affects Stock Market Valuations," Association for Information Systems - Brynjolfsson, Hitt, et al. - 1998
13	Jobless Recovery: Does It Signal a New Era - Gordon, Baily - 1993
13	Interpreting the ‘One Big Wave - Gordon
12	Measuring the Internet Economy: An Exploratory Study - Barua, Pinnell, et al. - 1999
12	Before the Computer - Cortada - 1993
9	economic growth since 1870: one big wave - Gordon
9	Measuring Inputs in Agriculture: A Critical Survey - Griliches - 1960
7	forthcoming. "Science, Health and Household Technology: The Effect of the Pasteur Revolution on Consumer Demand." Presented to the National - Mokyr, Stein - 1996
7	The Gap between Actual and Potential Output - Okun - 1962
5	More for less: The economic impact of semiconductors. Semiconductor Industry Association - Flamm - 1997
5	Tools or toys? The impact of high technology on scholarly productivity - Hamermesh, Oster - 2002
4	Macroeconomics, Eighth Edition - Gordon - 2000
4	The Welfare Implications of Invention - Oi - 1997
3	The Good Old Days — They Were Terrible - Bettmann - 1974
3	Communications and Economic Growth - Dudley - 1999
3	Pentium III: Enough Already - Wildstrom - 1999
2	Survey Finds PC Usage in Homes Has Dropped - Clark - 1999
2	One-Click Commerce: What People Do Now To Goof Off at Work - Lisser - 1999
2	Paper Boy - Doan - 2000
2	Changes in Labor Cost during Cycles in Production and Business." Occasional Paper 74 - Thor - 1960
2	Are We Living in the Middle of an Industrial Revolution - Mokyr - 1997
2	Inflation Shows SIgns of Stirring as Forces Restraining it Wane - Schlesinger, Dreazen - 2000
2	Computers, Productivity and Input Substitution," Economic Inquiry, 36:2 - Stiroh - 1998
2	data are taken from Oliner and Sichel (2000) and are transformed as follows. Sources for Table 2. Output (line 1): Table 1, line 1. Labor hours (line 2): Table 1, line 7, divided by 0.67, the implicit share of labor - All
2	trend growth and contribution of price measurement (lines 1-6 - Actual
1	Industrial Revolution," in The New Palgrave: A Dictionary of Economics - Revolution, Page - 1987
1	Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU - Revolution, Page - 1998
1	Computers Can Accelerate Productivity Growth - McGuckin, Stiroh - 1998
1	The NAIRU, Industrial Revolution, Page 52 Unemployment, and Monetary Policy - Staiger, Stock, et al. - 1997