Transatlantic Technologies: The Role of ICT in the Evolution of U.S. and European Productivity Growth

Robert Gordon and Hassan Sayed

No 27425, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the role of the ICT revolution in driving productivity growth behavior for the United States and an aggregate of ten Western European nations (the EU-10) from 1977 to 2015. We find that the standard growth accounting approach is deficient when it separates sources of growth between ICT capital deepening and TFP growth, because much of the effect of the ICT revolution was channeled through spillovers to TFP growth rather than being limited to the capital deepening pathway. Using industry-level data from EU KLEMS, we find that most of the 1995-2005 U.S. productivity growth revival was driven by ICT-intensive industries producing market services and computer hardware. In contrast the EU-10 experienced a 1995-2005 growth slowdown due to a paucity of ICT investment, a failure to capture the efficiency benefits of ICT, and performance shortfalls in specific industries including ICT production, finance-insurance, retail-wholesale, and agriculture. After 2005 both the U.S. and the EU-10 suffered a growth slowdown, indicating that the benefits of the ICT revolution were temporary rather than providing a new permanent era of faster productivity growth. This joint transatlantic post-2005 slowdown is consistent with the broader view that ongoing innovation has been less potent in boosting productivity growth compared to earlier decades of the postwar era.

JEL-codes: E01 E24 O33 O47 O51 O52 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-eff, nep-ict, nep-mac and nep-tid
Note: EFG PR
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Citations: View citations in EconPapers (9)

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