. "I INTRODUCTION, The Emergence of the New Economy--Dale W. Jorgenson." Enhancing Productivity Growth in the Information Age: Measuring and Sustaining the New Economy. Washington, DC: The National Academies Press, 2007.
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Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age
magnitude more slowly. Half of U.S. industries actually show a declining contribution of non-IT capital.
While the IT-producing industries demonstrate accelerating growth in every dimension, the impact is limited by their relatively small size. IT-using sectors are especially prominent in the accelerated deployment of IT equipment and software, while the non-IT industries contribute impressively to faster productivity growth. After 1995 IT-producing industries show sharply accelerating growth in productivity, while IT-using industries diverge from this trend by exhibiting a more rapid decline. Productivity growth in non-IT industries has jumped very substantially, accounting for much of the acceleration in economy-wide productivity.
The very modest acceleration in employment growth after 1995 has been concentrated in IT-using industries. Since the number of workers available for employment is determined largely by demographic trends, the acceleration in IT investment is reflected in rates of labor compensation and changes in the industry distribution of employment. The rapidly growing IT-using industries have absorbed large numbers of college-educated workers, while non-IT industries have shed substantial numbers of non-college workers.
The surge of IT investment in the United States after 1995 has counterparts in all other industrialized economies. Using “internationally harmonized” IT prices that rely primarily on U.S. trends, the burst of IT investment in all industrialized economies that accompanied the acceleration in the IT price decline in 1995 is revealed unmistakably. These economies have also experienced a rise in productivity growth in the IT-producing industries. However, differences in the relative importance of these industries have generated wide disparities in the impact of IT on economic growth. Among the G7 countries–Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—the role of the IT-producing industries is greatest in the United States.
To conclude: The mechanism underlying the resurgence of U.S. economic growth has now come into clear focus.8 The surge was generated by the accelerating decline of IT prices, propelled by a shift in the semiconductor product cycle from 3 years to 2 in 1995. The price decline set off an investment boom that achieved its peak during the last half of the 1990s and has now recovered much of the momentum lost during the 2001 recession. Achievement of the ambitious goals of the International Technology Roadmap for Semiconductors (2004) will greatly help to ensure that the America’s improved economic performance can be sustained.
More detail on this mechanism is provided by Jorgenson (2001). See Dale W. Jorgenson, EconomicGrowth in the Information Age, Cambridge, MA: The MIT Press, 2001.