Information Technology for Productivity: The American Experience: A Review

Abstract

This paper reviews the linkage between Information Technology (IT) and productivity revival in the U.S. economy in the 1990's and beyond. Several studies have clearly revealed that Information Technology can significantly contribute to productivity growth through the production and use of IT. It however remains a debate whether larger productivity growth accrues from IT use or its production. The paper also highlights the challenges encountered by analysts in measuring the contribution of IT to productivity growth. After year 2000, many analysts expected that labor productivity growth would slow down as IT investment retreated, but instead, it accelerated further over the years, albeit IT contribution was more than offset by several other factors.The paper concludes that the standard tools of growth analysis do not capture adequately the ways in which IT innovation and business process innovation are related. Further, there are risks that productivity growth could slow down in the near future. It is, however, certain that the effects of IT on productivity will appreciably spread to industrial countries beyond the United States, and there is no reason why IT should not play a similar role in such countries.