General Purpose Technologies and Surges in Productivity: Historical Reflections on the Future of the ICT Revolution

Paul David and Gavin Wright

No _031, Oxford Economic and Social History Working Papers from University of Oxford, Department of Economics

Abstract: The phenomenon of recurring prolonged swings in the total factor productivity (TFP) growth rate is approached in this paper by examining a particular episode in earlier twentieth century economic history. A marked acceleration of productivity growth in U.S. manufacturing occurred after World War I, and was the main driver of the absolute and relative rise of the private domestic economy’s TFP residual. This discontinuity reflected the elaboration and adoption of a new factory regime based upon the electric dynamo, a general purpose technology (GPT) that brought significant fixed-capital savings while simultaneously raising labor productivity in a wide array of manufacturing operations. But, rather than offering a purely technological explanation of the productivity surge of the 1920s, a more complex conceptualization of the dynamics of GPT diffusion is proposed. This highlights both the generic and the differentiating aspects of U.S. industrial electrification in comparison with that of the contemporary UK. Explicit historical contextualization of the GPT concept also sheds further light on the puzzling late twentieth century productivity slowdown, and it points to some contemporary portents of a future phase of more rapid total factor productivity growth.

Date: 1999-09-01
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