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OCR for page 24
1
Introduction and Impact of
Information Technology at the
Macroeconomic Level
Information technology has changed the way that most companies do
business. It is hard to imagine returning to an era in which payroll account-
ing, check processing, airline reservations, or stock exchange trades were
handled without computer technology. In a typical business day now, over
200 million shares are traded on the New York Stock Exchange alone; in
1989, U.S. commercial banks processed almost 58 billion payment transac-
tions.~ Transaction volumes of this magnitude would have been impossible
to handle with the technology of 50 years ago. Innovations in electronics
made over the past 40 years have been incorporated into new computers,
office automation equipment, communications equipment, and their associ-
ated software systems. Information technology has revolutionized services
both in service-sector industries and in the service activities that are an
increasingly integral part of goods-producing industries.
For purposes of this report, the service industries consist primarily of
transportation, communications, wholesale and retail trade, financial ser-
vices, insurance, real estate, utilities, and personal and professional ser-
vices; unless otherwise specified, information technology (IT) includes computer
and communications hardware, as well as the software and associated ser-
vices required to exploit that hardware.
Despite the obvious and dramatic changes in the economy brought about
by use of IT, a strange paradox emerges from analysis of aggregate U.S.
economic data. According to standard methods of calculation, productivity
in the business sector has grown slowly since the widespread introduction
24
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IMPACT OF IMFORMATION TECHNOLOGY AT THE MACROECONOMIC LEVEL 25
of IT. However, the slow growth of measured U.S. productivity has not
been occumng uniformly throughout the economy. Measured productivity
in the manufacturing sector, after slowing in the 1970s, has been growing at
a rate of about 3 percent a year, as gauged by the average annual rate of
increase in measured output per labor-hour over the past 10 years. The
farming sector has also achieved solid growth in productivity. Much of the
rest of the economy, however, has lagged behind especially construction
and elements of the service sector. The result is that business as a whole
has achieved only about a 1-percent-a-year improvement in output per hour
in recent years. Particularly puzzling is the weak measured performance of
the service sector, which has accounted for the bulk of the nation's expendi-
tures in IT.
The dilemma is this: although data show that over $750 billion has
been invested in IT hardware alone in the 1980s (Figure 1.1), and although
120
110
100
~ 90
o
a,
o
In
o
._
m
80
70
60
50
40 -
30
20 -
10
O- .
1981 1982 1983 1984 1985
-
-
1986 1987 1988 1989
Year
FIGURE 1.1 Growing investment in information technology (IT) by the service
sector. The only systematic data available on IT expenditures account for hardware
components but exclude software and services. Thus this figure shows expenditures
only for office, computing, and accounting equipment, communications equipment,
instruments, and photocopy and related equipment; it does not include expenditures
for software, electronic information services, data processing and network services,
computer professional services, custom programming, systems integration, consult-
ing, or training services. SOURCE: Stephen Roach, Morgan Stanley & Co.
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26
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
BOX 1.1 One Assessment of the Information
Technology Paradox
Stephen Roach's assessment of the information technology (iT) para-
dox hinges on what he believes are the unique characteristics of the
service sector's competitive environment. While U.S. manufacturing firms
faced intense competition in the 1980s, service companies were pro-
tected by regulation, he says, and by the lack of foreign competition in
effect shielding them from the harsh realities of market pressures. In
response, he maintains, service companies became complacent and al-
lowed their costs to become increasingly bloated, leading to ~ most
disappointing record of productivity growth that is consistent with the
macroeconomic evidence presented in Chapter 1.
Roach points out that the service sector's lagging efficiencies are
particularly disturbing because it is the segment of the economy that has
invested most heavily in IT. Indeed, over the past 10 years, the service
sector spent $862 billion on IT hardware alone-accounting her about 85
percent of the nation's total IT expenditures This surge of spending has
been enough to equip the average white-callar worker In the service
sector with about $10,()00 worth of IT hardware in 199'-essentially
double the endowment Mat existed in 1980~ Such extraordinary commit-
ments to IT have not yielded measurable benefits far productivity, Roach
maintains, because service companies have had little incentive to strive
for efficiencies, given the unique protection they enjoyed from compet'-
tive realities.
As a result of this rapid spending on IT, Roach argues, the service
sector has experienced an ominous transformation of its cost structure.
Service companies used to be largely vartabJe-cost producers, win the
salaries at white-collar workers constituting the bulk of overall expenses.
When business conditions toughened, wh':e-collar job aeration was an
effective means of cost control. Now' however, courtesy of the massive
infrastructure of installed IT, service eornpan~es have a new layer of fixed
costs in effect transforming them from variable- to increasingly fixed-
cost producers. The commitment to IT has, therefore, crimped the
abiT'ty of service managers to adapt to changing business conditions.
Roach also stresses that this lack of flexibility has come at a most
inopportune n~omer~t for services-~ point in time when co~npetit'Ye
pressures have intensified dramatically. Regulation has been replaced by
deregulation. Moreover, the pressures of foreign competition have been
increasingly evident in the farm of a dramatic increase ire foreign direct
investment in the U.~. service sector inflows of Capital that have deep-
ened the packets of many players battling for market share in the world$s
richest and deepest service market.
in response to this intensified competitions a new wave of restruc-
turing has been unIcashed in the vast service sector-highlighted in the
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IMPACT OF IMFORMATION TECHNOLOGYAT THE MACROECONOMIC LEVEL 27
last ~ years by nearly a dozen mega-bank mergers, the Failures of a
number of major airlines, and dramatic downsizing In retailing, telecom-
munic~ions, accounting, advertising, and the legal profession In each of
these industries, wh~te-coliar jobs are now being permar~er~tly eliminated.
Roach maintains that this development would not be occurring if IT were
delivering what it was intended to deliver increased output through
meaningful improvements in white-collar productivity. Thus, he views the
reality of serv~ce~sector restructuring as an independent confirmation of
the IT paradox-a growing recognition by managers that there Is, in fact,
considerable Validity to the disturbing results conveyed through the
macroeconomic data on measured produ~:iY'ty. At the same time, he
also views restructuring as a powerful catalyst that is now forcing manag-
ers to rethink ap,olicat~ons of IT setting In motion a process that could
well culminate in Me long-awaited macroeconomic payback from the use
of IT
SOURCE: Stephen Roach, Morgan Stanley ~ Co.
experienced executives and observers of business note that IT has contrib-
uted to important positive changes in the way that business is conducted,
standard measures of productivity at the macroeconomic level still reveal
few benefits of such changes over the past two decades.2 What are some
possible explanations?3
.
One possibility is that there has been wasteful or inefficient use of
information technology in the service sector. Although it provides a power-
ful tool, IT can be used well or badly. The view that mismanagement has
kept the new technology from providing much impetus toward improving
productivity has been expressed in the past by Stephen Roach, a member of
the committee (Box 1.1~.4
· An alternative view is that the use of IT has in fact raised produc-
tivity significantly and that other problems have caused the slowdown in
productivity growth. IT is only one of several factors that affect productiv-
ity. Thus the slow growth of measured productivity in services may be the
result of such problems as poor performance in U.S. schools, weaknesses in
technology development in areas other than IT, changed energy prices, gen-
erally inadequate investment in capital equipment or structures, including
infrastructure, and/or a shift in employment to sectors that present limited
opportunities for increasing productivity. Or perhaps a slowing of growth
in measured productivity was inevitable as the economies of industrialized
countries matured and the relatively easily obtained gains in productivity
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28
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
were realized. In fact, most other industrialized countries have also slowed
in measured growth at about the same time as the U.S. economy.s
.
A third perspective on this issue is that IT may have been used to
transform business activities but that these changes are being missed by
current methods of measuring productivity.6 In this view, the use of IT is
bringing about real increases in productivity that are not captured in the
data. Thus the slowdown in productivity growth may be partly or wholly
the result of errors in measurement.
A fourth view argues that IT-based systems have the potential to
raise the productivity of the economy significantly, but that this result will
take time. Economic historians have pointed out that major changes in
technology, such as the introduction of steam power or electrification, have
affected productivity only after many years.7 Thus, the payoff from invest-
ments in IT hardware may have been delayed because software develop-
ment and systems reengineering have lagged behind and because it takes
many years to train people to use new technology productively. This opti-
mistic view of the potential for future growth in productivity suggests that
payoffs can be expected in the years ahead as U.S. service industries learn
to use IT more effectively.
.
.
A fifth view underscores the importance of examining the impact
of IT at much lower levels of aggregation than is possible using macroeconomic
data. A 1993 study by Erik Brynjolfsson and Lorin Mitts found that infor-
mation technology "has made a substantial and significant contribution to
the output of firms," with a return on investment for IT that is significantly
greater than that of other capital investments.
These various alternative approaches to explaining the IT paradox are
not mutually exclusive. It could well be that some mistakes were made in
early adoptions of IT, leading to wasteful investment, but that as software
development, worker retraining, and management understanding progress,
investments will pay off in measurable forms. For example, IT may be
applied initially to increase information about markets, whereas productiv-
ity may increase only later as the information is used to improve operations.
In considering these alternatives it may be useful to keep in mind the
difference between the average and the marginal contribution of using IT.
The average contribution of using IT can be determined, in principle if not
in practice, by asking how much lower productivity in the economy might
be if there had been no electronics revolution to bring down computing
costs: what would the level of productivity be if companies did not have
access to IT at all? Determining the marginal contribution of using IT
requires asking a different question: Given the existing stock of IT capital,
what increment to productivity is gained by adding another dollar of invest-
ment in additional IT? It is possible in principle that using IT has contrib
OCR for page 29
IMPACT OF IMFORMATION TECHNOLOGY AT THE MACROECONOMIC LEVEL 29
uted greatly to productivity on average, but that overinvestment at the mar-
gin has led to a low return on the last dollar. Often without explicitly
stating so, some discussions of the productivity paradox focus on the aver-
age contribution of using IT, whereas others actually address the question
of overinvestment at the margin.
THIS STUDY-APPROACH, SCOPE, AND TERMS
Motivated by questions concerning how the use of information technol-
ogy contributes to productivity in U.S. service industries and whether the
potential benefits of information technology are being full realized, the
committee initially sought to assess the impact of IT on productivity in the
service sector. However, the committee soon determined that this was the
wrong issue.
Although it attempted to investigate key factors in each of the five
approaches to explaining the productivity paradox, the committee found no
way to determine with precision the relative significance of the various
alternatives as they pertain to use of IT. There was general agreement that
existing methods for measuring productivity at the aggregate level do not
entirely capture the changes taking place in the U.S. economy as a result of
using IT and that focusing on the apparent productivity paradox gives an
overly narrow picture of what is happening in services. Indeed some com-
mittee members argued that the whole concept of productivity, as it is
currently measured, may be outmoded and that other measures of perfor-
mance provide a better indication of the contribution of IT. There was a
consensus that the use of IT has changed the way that businesses operate,
and that the locus of innovation and of the production of value has shifted
away from traditional manufacturing activities and toward service indus-
tries and service activities.
Based on its assessment of current knowledge, the committee concluded
that productivity is an important but not a sufficient measure of benefit. As
measured, productivity does not capture other important elements of perfor-
mance such as the quality, flexibility, convenience, variety, responsiveness,
reliability, and new opportunities that the use of IT in services can permit.
In addition, data on assessments of service-sector productivity often do not
reflect the substantial benefits customers or suppliers have received from
service-sector investments in IT. If captured at all, these benefits have
shown up in measures of the customer- or supplier-industries' productivity.
Finally, the use of IT in services has often transformed the structures of
both manufacturing and service industries, created cross-competition among
different industry segments, allowed development of global supplier and
customer networks, created whole new industries, and changed the very
way in which commerce and management are performed.
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30
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
In addition, IT is a relatively new technology, and hence long delays
can be expected before its effective deployment. Many of the service in-
dustries into which it has been deployed have not traditionally managed
major technological changes. Even in industries inured to such changes,
introduction of a new technology typically takes significant time and is
accompanied by mistakes in implementation and evaluation and by lags in
profitability increases.
In the course of its deliberations, the committee recognized that under-
standing and improving the impact of IT on the overall performance of
services activities, not simply determining the productivity of IT in ser-
vices, is the real challenge. Moreover, the committee came to believe that
the primary impediments to the full exploitation of IT to improve service-
sector business practices and performance were not as much issues of inad-
equate technology as they were issues of management. For this reason, the
report focuses primarily on the roles of management in the exploitation of
IT, although the remarkable dynamism that characterizes the evolution of
information technology itself has not gone unnoticed.
To better understand these complex issues, the committee chose to in-
vestigate the full range of impacts of IT use on performance in the service
industries, including measured productivity as only one element in overall
performance. To do so, the committee analyzed the impacts of IT use at
four levels: the macroeconomic level, the industry level, the enterprise
level, and the activity level within the enterprise. The purpose of these
inquiries was not so much to critique past studies or results as to offer
practical insights to executives and policymakers concerning the utility of
available data and the application of practices that might improve IT's im-
pact on the performance of service activities in the future.
CURRENT DATA AND MEASURES OF PRODUCTIVITY
Based on existing data, it is impossible to determine exactly what pay-
off the U.S. economy has achieved from use of IT. To understand this point
one must look at the ways in which productivity is currently measured,
particularly in the service industries. There are both strengths and weak-
nesses in the current statistical base. The recently updated productivity
series developed by the Bureau of Labor Statistics for selected industries
shows strong growth in many service industries. The aggregate data from
the Bureau of Economic Analysis also offer useful insights about the pro-
ductivity of the service sector. But both series may ignore or understate
some key factors that contribute to productivity in several service indus-
tries. Alternative measures of performance may be useful to supplement
measures of productivity or to substitute altogether for them as indica-
tors of economic performance.
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IMPACT OF IMFORMATION TECHNOLOGYAT THE MACROECONOMIC LEVEL 31
National Income and Product Accounts Prepared by
the Bureau of Economic Analysis
The Bureau of Economic Analysis (BEA) of the U.S. Department of
Commerce has responsibility for preparing the National Income and Prod-
uct Accounts (NIPA). The data in these accounts are comprehensive, cov-
ering economic activity throughout the U.S. economy. When the frame-
work of the accounts was developed after World War II, the concern of
public policy was to avoid a return to the disastrous period of the Great
Depression. The data that are prepared are used when monetary and fiscal
policy are adjusted in order to influence the level of demand in the overall
economy. The need to be comprehensive and the focus on policies affect-
ing demand influence in many ways the nature of the data collected. Thus,
at times, the data are limited in their usefulness for studying aggregate
supply productivity and long-term growth.
Traditionally, the gross national product (GNP) has been the principal
aggregate measure of all of the goods and services produced in the economy.
How this figure is constructed is a factor in its limitations and general
validity for assessing productivity. The basic data that go into GNP de-
scribe the sales of goods and services for consumption, the sales of goods
(including construction) for investment, and government purchases of goods
and services (including the services government itself produces). Included
in GNP are final sales, that is, sales to consumers or to government or the
sales of durable goods to businesses. Sales of components or raw materials
that are then processed further are considered sales of "intermediate" goods
and are not included directly in GNP. Additions to inventory are counted as
part of investment and are added to final sales in computing GNP (or sub-
tracted in the case of any depletion of inventories).
The GNP includes the income that is earned by U.S.-owned assets lo-
cated overseas minus the earnings of foreign-owned assets located in the
United States. When this net income is subtracted out, the resulting aggre-
gate is called the gross domestic product (GDP). In its recent revisions of
the NIPA, BEA has highlighted GDP rather than GNP. GDP gives the best
aggregate indicator of economic activity within U.S. borders.
The BEA collects information on final sales and inventories to estimate
GDP in current dollars, that is, with everything priced at its actual sales
price. It then uses price information collected by the Bureau of Labor
Statistics and, for some components, by BEA itself to construct an aggre-
gate price deflator for GDP. This deflator is used to transform GDP in
current dollars into GDP in constant dollars, also known as real GDP. Real
GDP reflects the total of goods and services produced in the economy priced
in base-year prices, currently 1987 prices. Putting everything in common
prices is designed to remove the effect of inflation on GDP and leave only
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32
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
an index of the increase in the physical quantities of goods and services
produced in the economy, often called the gross domestic product originat-
ing in the U.S. economy (GPO).
Once total GDP has been calculated, the activities of the government
sector,9 owner-occupied housing, and the nonprofit sector are often sub-
tracted out, and the resulting measure of output is then described as the
GDP originating in the private business sector of the economy (i.e., the
GPO of the business sector).
Business GDP can be subdivided further into the GDP produced in each
sector or industry in the economy (GPO by industry), based largely on the
wage and capital income generated by the industry. Obtained in this way,
the output of an industry reflects the value added produced within the in-
dustry, that is, the real value of the sales of the industry (adjusted for any
change in inventory) minus the value of materials and services purchased
from other industries.~° Estimating the contribution to total GDP made by
each constituent industry often involves some educated guesswork, because
many companies have plants in several different industries, and so their
income has to be divided up to account for their various activities.
Another difficulty encountered in determining the real (constant-dollar)
output of each industry comes in developing suitable industry price defla-
tors. The dollar value of income generated in each industry is divided by an
industry price deflator in order to compute real output of the industry in
1987 dollars. This approach is analogous to the procedure used to compute
aggregate real GDP in 1987 dollars, but some of the industry price deflators
are more difficult to construct than the aggregate price deflator. The prices
associated with both the outputs and the inputs of some industries are in-
trinsically hard to measure, or data are simply not collected that allow
accurate measurement. ~ ~
Although it develops data on business GDP and GDP by industry, the BEA
does not publish data on productivity. Instead, the responsibility for measuring
productivity in the U.S. economy rests with the Bureau of Labor Statistics.
Productivity from the NIPA Data: What do the Numbers Show?
The Bureau of Labor Statistics (BLS) makes some adjustments to the
NIPA data on output associated with business GDP and GDP by industry and
combines those data with data on labor input by industry to give average labor
productivity (Box 1.2), computed as real GDP per employee-hour. (Box 1.2
discusses different concepts of productivity, such as labor, capital, and multi-
factor productivity.) BLS publishes data on productivity only for the business
sector as a whole, for nonfarm business, and for manufacturing. However,
BLS will release on request the productivity data for individual industries, and
the resulting productivity information is often widely quoted.
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IMPACT OF IMFORMATION TECHNOLOGYAT THE MACROECONOMIC LEVEL 33
Table 1.1 shows the rates of growth of average labor productivity for
the business sector as a whole and for the major industry sectors as pre-
pared by BLS using the BEA data. The figures for the productivity of the
business sector show the pattern that has become familiar. Productivity
grew at a rate of a little less than 3 percent a year in the business sector as a
whole from 1948 to 1973 and then fell to 0.63 percent a year from 1973 to
1979 before making a partial recovery from 1979 to 1989.
The business sector is divided into goods- and service-producing indus-
tries, and shows solid growth in both parts of the economy over the period
~. ,
TABLE 1.1 Average Annual Growth in Gross Domestic Product per
Labor-Hour for Major Sectors of the U.S. Economy, 1948 to 1989
Average Annual Rate of Growth
(% per year)
Difference in
Rate of Growth,
1948-73 and
1979-89 1973-891973-89
Sector
1948-73
Business 2.88 0.63 1.35 1.08 -1.80
Goods producing 3.21 0.71 2.31 1.71 -1.50
Farming 4.64 0.11 3.22 2.04 -2.60
Mining 4.02 -5.S6 2.13 -0.82 -4.84
Construction 0.58 -2.02 -0.71 - 1.20 - 1.78
Manufacturing 2.87 1.80 3.33 2.75 -0.12
Durable goods excluding
nonelectrical machinery 2.56 1.55 2.35 2.05 -0.51
Nonelectrical machinerya 2.03 1.06 9.10 6.01 3.98
Nondurable goods 3.40 2.37 2.37 2.37 -1.03
Service producing 2.49 0.58 0.84 0.74 -1.75
Transportation 2.31 0.15 0.95 0.65 -1.66
Communication 5.22 4.27 4.84 4.63 -0.59
Utilities 5.87 2.66 2.35 2.46 -3.41
Trade 2.74 -0.35 2.10 1.18 -1.56
Wholesale 3.14 -1.21 2.65 1.18 -1.96
Retail 2.40 0.14 1.72 1.13 -1.27
FIREb 1.44 0.36 0.05 0.17 -1.27
Services 2.17 0.84 0.01 0.32 -1.85
Government enterprise -0.15 0.62 0.04 0.26 0.41
General government 0.21 0.03 0.53 0.34 0.13
aNonelectrical machinery hours from Bureau of Labor Statistics.
bFinance, insurance, and real estate.
SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis. 1991. Survey of
Current Business, April, Tables 6.2 and 6.11.
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INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
BOX I.2 Measuring Capital and Multifactor Productivity
Pleasures of productivity relate physical output to physical input. As
such, they encompass ~ family of measures ranging from measures of
single-fac$or-input productivity, such as output per unit of labor input or
output per unit of capital input, to measures of multi~ctor productivity,
such as output per unit of labor and capital combined. }n the form of
indexes these measures present the change in output associated with the
corresponding change in input. in other words, the indexes show the
change in resources (labor, capital, materials, or all combined) used to
produce the output of the activity being measured. They do not measure
how much of the change in output came from any of the individual input
factors, but rather how the many Actors affecting the production process
resulted in Flanges in resource use.
The most extensively developed and widely used measure of produc-
tivity is the one relating output to labor input-labor productivity. It is a
~tool relevant for analyzing labor costs, real income, and employment and,
I as a practical matter, is most easily measured. However, an increase or
decrease in output per emplayee-hour does not imply that labor is solely
or necessarily even primarily responsible for improved or worsened pro
duct~vity. Movements in output per hour reflect technological innova
tions, changes in capital input, scale of production, education, manage
ment, and many other factors as well as the skits and efforts of the work
force.
1
Average labor productivity is the ratio of output to labor input.
Labor input is chosen as the most important factor of produ~ion the
cc~mpensat'an of labor is about two-thirds of fatal Flue added. But labor
productivity can change for reasons that have nothing to do with the
work force. Various factors can cause labor productivity to change oYer
time. For example' there have been substantial increases in the amour,'
Of capital used per worker. Techr`oiogy itself arid the organization of
work may changes These considerations do riot invalidate Me concept of
labor productivity; they simply mean that it is important to ~r`terpret it
correctly Also, it nosy be necessary to choose among a fancily of meat
sures rel~ir~g out'cut to labor, capital, and other inputs, some of which
adjust {or quality and some of which do not.
Many economists prefer a concept called multihctor productivity or
total-factor productiY'ty, When the value-added measure Of output is
used, grow - h in multihctor productiY'~g, is computed as Me growth rate
of output minus a weighted average of the growth rates of labor and
capital inputs The weights are then shares of labor and capital costs in
total cost. Increases in multifactor productivity reflect increases In the
efficiency with which labor and capital are used to produce Output.
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IMPACT OF IMFORMATION TECHNOLOGY AT THE MACROECONOMIC LEVEL 41
are published for 39 service industries, covering about 42 percent of all
workers in the service industries in the private business sector.
The BLS also publishes measures of productivity for the federal gov-
ernment with separate detail for the common functions provided by federal
agencies, such as record keeping, library services, building and grounds
maintenance, loans and grants, and so on. In addition, work is currently
being conducted on the development of indexes of productivity for hospitals
and additional wholesale trade activities.
The measures of output used in these BLS series are independently
developed from data on sales, prices, and physical units whenever possible,
combined with labor input weights. In some instances the data on labor
input weights are not available, and approximations such as gross margins
have to be used. The data on labor input cover the hours of all persons
employed in a particular industry, including the self-employed, and are
based on the BLS surveys of establishment employment and hours. The
"hours of employees" are based on hours-paid data from the surveys of
establishment employment and hours. The hours of the self-employed are
derived from the household survey of employment and hours conducted for
the BLS by the Bureau of the Census.
What Do the BLS Data on Selected Industries Show?
Table 1.3 shows the compound annual percentage change in output per
employee-hour for selected service industries over the period from 1973 to
1990, the longest period for which continuous measures from BLS are available.
Contrary to the general belief that service industries are characterized by
uniformly low growth in productivity, a wide range in the rates of growth is
evident. Over the most recent decade, 1980 to 1990, the rates range from a
decline of 4 percent per year for gas utilities to an increase of 9 percent per
year for railroads. The increase for railroads actually exceeds that for
almost all manufacturing industries, in which significant rates of growth in
productivity have occurred. Even over the longer period from 1973 to
1990, when the range of rates of growth was narrower, there was still
considerable variation across industries.
Gaps in BLS Data and Measures of Productivity
Although BLS publishes at least one measure of productivity for each
major service activity group transportation, communications, and so on-
there are major areas within each of these groups for which no measure of
productivity has been developed and published.
One reason for these gaps is that it is difficult to define and develop
meaningful indicators of output and/or input in many service industries. In
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42
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
TABLE 1.3 Growth in Productivity in Selected U.S. Service Industries,
1973 to 1990
Period of Time and
Output per Labor-Hour
(average annual % change)a
Service Industry SICb Codes 1973-90 1973-801980-90
Transportation
Railroad 4011 5.8 1.59.0
Bus carriers, class 1 411, 13, 14 0.7c o.s_0.7d
Trucking, except local 4213 3.2 2.33.9
Air transportation 4512, 13, 22 2.5 3.22.1
Petroleum pipelines 4612, 13 0.6 -0.71.6
Utilities
Telephone communications 481 5.5 6.84.5
Electric utilities 491, 3 1.4 0.91.7
Gas utilities 492, 3 -2.5 -0.3-4.0
Trade
Scrap and waste materials 5093 n/ae n/ae1.4d
Hardware stores 5251 1.9 1.81.9
Department stores 5311 2.6 2.62.6
Variety stores 5331 -0.4 -1.60.5
Grocery stores 5411 -1.0 -0.1-1.7
Retail bakeries 546 -0.7 -1.1-0.4
New- and used-car dealers 5511 1.4 0.52.1
Auto and home supply stores 5531 2.2 2.42.0
Gasoline service stations 5541 2.9 2.92.9
Men's and boys' clothing stores 5611 1.7 0.52.6
Women's clothing stores 5621 3.2 3.33.2
Family clothing stores 5651 1.8 1.81.8
Shoe stores 5661 1.5 1.41.6
Home furniture stores 571 1.0 0.31.5
Household appliance stores 5722 2.5c 2.72.6d
Radio, TV, and computer stores 573 4 8c 4 35.7d
Eating and drinking places 581 -0.6 -0.5-0.6
Drug stores 5912 0.5 1.4-0.1
Liquor stores 5921 -0.4 0.2-0.8
Business and personal services
Commercial banks 602 1.2 -0.52.7
Hotels and motels 7011 -0.4 0.4-1.0
Laundry and cleaning services 721 -0.8 -1.2-0.5
Beauty and barber shops 7231, 41 0.8 0.01.4
Automotive repair shops 753 -0.2 -1.20.4
aBased on compounding formula.
bStandard Industrial Classification system code.
C1973 to 1989.
dl 980 to 1989.
en/a, not available.
SOURCE: Bureau of Labor Statistics.
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IMPACT OF IMFORMATION TECHNOLOGY AT THE MACROECONOMIC LEVEL 43
most cases adequate measures have to be derived from data obtained in
surveys conducted for purposes other than measuring productivity. For
measuring productivity, the output indicator should be final to the activity
being examined, quantifiable, and consistent in coverage with, but indepen-
dent of, the input indicators; should reflect differences in the quality of the
activity being evaluated; and should represent the major part of the activi-
ties of the sector. For many service activities, the available data do not
meet these criteria. The major gap within communications is radio and
television broadcasting; in electricity, gas, and sanitary services, it is sani-
tary services. In trade, the gap in coverage is in the area of wholesale trade;
in finance, insurance, and real estate the gap is in the real estate component.
In business and personal services, no measures are available for health,
education, and legal services. Finally, in the area of government, the major
gap is in state and local government.
Conclusions on Productivity Measures Developed from BLS Data
The BLS has made considerable progress in developing indexes of pro-
ductivity for selected service industries. The measures of productivity for
some of these industries are very accurate, clearly reflecting changes in output
per unit of labor input. Because the concepts of output are relatively straight-
forward and appropriate data are readily available, the measures for transpor-
tation, communications, and public utilities fall into this category. The mea-
sures for some of the trade industries present some difficulties primarily because
of the heterogeneity of the categories of merchandise line sales and the limited
availability of adequate price deflators. However, these indexes of productiv-
ity are useful indicators of trends over time and are continually being im-
proved as the number of detailed price indexes increases.~7
Many difficulties remain in clarifying some of the basic conceptual
problems of defining the output of certain service industries, and many
inadequacies are present in the data available. In particular, the BLS does
not have the resources to follow the rapidly changing nature of the output in
many services industries, changes that have been enabled by the use of IT
in many cases. BLS's measurement of productivity is good if output over
time can be captured adequately by a simple measure such as passenger-
miles. It does not do so well when other characteristics are important, and
in such situations it suffers from the same kinds of problems that the BEA
data suffer from. For example, in the case of airlines, no account is taken
of changes in the frequency of service, ease of booking or changing reserva-
tions, flying time, number of stops, on-time record, and so on. For many
service industries, these aspects of service quality are crucial.
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44
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
ALTERNATIVE MEASURES OF
PRODUCTIVITY AND PERFORMANCE
The slowdown in the growth of measured productivity in services has
been the subject of great concern among policymakers, but productivity is
only one measure of economic performance. For the business manager,
other measures of performance may provide a better guide to long-term
profitability and success. Productivity and profitability are linked in that,
other things being equal, a company that is able to raise its productivity
relative to that of its competitors will be able to lower its costs and raise its
margins or reduce prices to increase market share.
But other things are not always equal. For example, a company that
provides a unique new product or service may be able to raise its profitabil-
ity by more than a company that simply concentrates on raising productivity
in its existing lines of business. Or an industry may find that its market
conditions change. The deregulation of many service industries -has forced
them to adapt and, in many cases, to raise productivity. But the increase in
competition within these industries has lowered prices, and margins and
profits are hard to come by. Airlines, railroads, and trucking are all in this
position.
For workers, employment may be more important than productivity,
especially in the short run. In fact some people see a trade-off between jobs
and increases in productivity. The U.S. economy has been very successful
over the years in increasing the number of jobs it has generated, and the
largest number of these have been in the service sector. The fear in some
quarters is that as some labor-intensive companies in the service sector seek
to boost their productivity via restructuring, the creation of full-time jobs
may slow.~9
However, downsizing is not a long-term recipe for sustained growth in
productivity. Once companies have eliminated excess staff, they will need
to look beyond downsizing and restructuring and embark on a path of judi-
cious expansion that includes increases in the rate of hiring and in capacity.
Recent evidence suggests that this may be starting to happen. Over the
period from October 1992 to May 1993, job growth averaged 165,000 jobs
per month, well in excess of the paltry gains of 18,000 per month that
occurred in the first 17 months of the recovery. For example, during 1992
business spending on capital equipment has risen at an annual rate of 16
percent, with 60 percent of the increase concentrated in IT hardware.
For some purposes international competitiveness is as important or more
important than productivity. Again, the two are linked, but external circum-
stances may change so that the two indicators of performance move differ-
ently from each other. For example, the U.S. auto industry and the U.S.
textile industry have both succeeded reasonably well in raising productivity
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IMPACT OF IMFORMATION TECHNOLOGY AT THE MACROECONOMIC LEVEL 45
in recent years. But both industries have come under intense competition
from foreign companies that have done as well or better in increasing pro-
ductivity and product quality or have been able to make use of less costly
labor. A recent study indicates that compared to similar industries of other
countries, U.S. service industries have generally higher absolute levels of
productivity (Box 1.3), although U.S. rates of growth in productivity have
lagged those of many other nations.20 Furthermore, the United States main-
tains a healthy $52 billion service trade surplus with foreign nations.
OBSERVATIONS AND CONCLUSIONS
Many Factors Influence Productivity:
IT Affects Many Aspects of Performance
As noted at the beginning of this chapter, many factors besides the
application of information technology determine growth in the productivity
of the U.S. service sector. This is not surprising, since output itself is a
function of multiple inputs and technology, the latter affecting how inputs
are combined in production. Productivity is also influenced, for example,
by other kinds of capital investment, such as buildings for retailers or air-
planes for airline companies. The fact that over the past 15 to 20 years
slow growth in productivity has been accompanied by rapid investment in
IT has suggested to some people that the use of IT has actually caused the
slowdown in productivity growth. But the committee determined that it is a
mistake to conclude that IT is the culprit. It surely is in some cases, but in
others it has probably made a large positive contribution. The key point is
that the currently available macroeconomic data cannot precisely measure
how investments in IT alone are influencing productivity in the services.
As documented and discussed above in this chapter, the committee's find-
ings have led it to make the following observations about current macroeconomic
data on service-sector productivity and how investments in and the use of
IT have influenced these data:
.
.
The BEA macroeconomic data do not deal adequately with changes
in the quality of the services provided. And IT is often used to improve the
quality of services. The development and use of better measures of output
might show a very different picture of growth in productivity.
The BEA macroeconomic data do not adequately allow for the ef-
fects of new services, and IT is often used to provide new services. Again,
the development and use of better measures of output that account for new
services could show a radically different picture of growth in productivity.
· Existing data on the capital input to production do not take account
of the knowledge capital (see Box 1.2) that is considered by many to be the
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46
BOX 1.3 A Recent Study of Service-Sector Productivity in the
United States and Other Countries
l
1
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
The Global Institute of McKinsey & Co., assisted by economists Mar-
tin Baily, Francis Bator, and Robert Solow, completed in 1992 a com,oari-
son of the productivity of the airline, banking, general merchandise retail-
ing, telecommunications, and restaurant industries in the United States
relative to the comparable industries in European countries and Japan.
For three of the industries airlines, banking, and telecommunica-
tions the study used quantitative output measures of the type used by
the Bureau of Labor Statistics in its analysis of specific industries. For
example, in airlines, different output measures were combined, such as
passenger-miles, number of aircraft maintained, and number of passengers
served Adjustments were made to allow for such factors as different
route lengths and fleet structures. For the other two industries value
added was the measure of output, with the international comparisons
made using what are called purchasing power parity exchange rates.
Except in the restaurant industry, where productivity was compa-
rable in the countries studied, the findings indicated that the U.S. ~E,dus-
tries had a lead in productivity, usually in the range of 20 to 40 percent.
Several explanations for this productivity lead were examined. For ex-
ample, it was found that U.S. airlines, larger average size gave them some
advantage over European airlines. Differences in the mix of output and in
capital intensity were also significant in some cases. The most important
difference overatI, however, was found to be differences in how the work
force is Organized and managed. There is greater competitive pressure
and less restrictive regulation In the U. S. industries than in those of over
countries studied.
The ~cK'nsey study Is based an an analysis in a single year (1989) of
productivity levels and therefore does not directly contradict the Bureau
of Economic Analysis macroeconomic data that show a slow rate of
growth of productivity in the service sector in the United States. But the
finding that tJ.S. services have a substantial lead over other countries
could reinforce the concerns about the BEA data that are presented in
this chapter.
In general the McKinsey study concluded that differences in technol-
ogy were not the most important factor in the productivity d't~rences
that they found, since the technology is available to enterprises in all of
the countries studied if they wish to use it, For telecommunications and
banking, Me study did conclude that a failure to adopt the most advanced
information technology had hurt productivity in other countries. The
teleeammuntc~ions industry in Germany, for example, had not intro-
duced electronic switching and could not offer business customers high-
speed data trar~sm~ss'an. And in the banking industry, both Germany and
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IMPACT OF IMFORMATION TECHNOLOGY AT THE MACROECONOMIC LEVEL 47
the united Kingdom suffered a productivity disadvantage because fewer
automatic teller machines had been deployed. U.S. banks had invested
more heavily in terminals, allowing many activities to be centralized that
were still carried colt less productively In branches overseas, particularly
so In the United Kingdom.
most important part of the capital base of the service industries. The use of
any improved measure of capital input could also drastically change the
estimates of growth in productivity.
· In some service industries, the BEA data exclude, by definition,
any changes in measured productivity because real output is measured by
the number of employees working in the industry. Banking and financial
services are the most important examples.
For the business decision maker, productivity may be an important con-
sideration but will often not be the most important one. Productivity is
important for business because a company that has weak productivity in its
core business activities, relative to other companies, is tying one hand be-
hind its back in its competitive struggle. But productivity is rarely suffi-
cient for business success and should not be the sole or even the primary
basis for most companies' decisions about investment in IT. Providing
value to the consumer is often more important than increasing productivity,
and such circumstances will require that measures of performance be used
to track growth in the economy and to evaluate the part played by IT.
Making better business and policy decisions about investing in IT requires
having more information about what IT is being used for than can be pro-
vided by the standard data on productivity. In Chapters 2 through 4, the
committee discusses how IT has been used to improve performance at the
industry, enterprise, and activity levels of the U.S. service sector.
ORGANIZATION AND SCOPE OF THIS REPORT
In refining its approach in response to its initial findings, the committee
chose to investigate the full range of impacts of the use of IT on perfor-
mance in the service sector. Thus the committee examined the nature and
measurement of performance in services at progressively less aggregated
levels of analysis: the industry level (Chapter 2), the enterprise level (Chapter
3), and the activity level (Chapter 4~. These chapters are supplemented by
appendixes that provide more methodological detail and supporting data:
Appendix A describes selected research on economic and strategic impacts
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48
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
of IT; Appendix B describes methods used by the Bureau of Economic
Analysis to derive measures of output; Appendix C describes methods used
by the Bureau of Labor Statistics for deriving measures of productivity;
Appendix D describes how the committee conducted its study, including the
interview process used by the committee to inform its deliberations and a
summary of its results.
Chapters 2 through 4 culminate in Chapter 5, which discusses implica-
tions for managers in organizations wishing to improve their management
of information technology, and Chapter 6, which presents issues and recom-
mendations for public policy.
To put this report in perspective, some observations on the committee's
operation and scope of concern are appropriate. First, this report was shaped
by interactions within a multidisciplinary committee that included business
executives, economists, behavioral scientists, management theorists, and tech-
nologists. Second, the committee considered the context of international
competitiveness in conducting its analysis, but detailed investigation of in-
ternational conditions was beyond its scope. Third, although smaller com-
panies were represented in the data that support industry- and national-level
analyses, the committee's resources did not permit a systematic examina-
tion of the distinguishing characteristics of smaller enterprises.
In addition to using the standard macroeconomic data collected and
developed by government agencies, the committee drew on observations
from managers and executives in industry (a group including some of the
committee's own members, as well as numerous others). These observa-
tions were obtained through interviews that were used to develop and check
insights, not to generate quantitative data. Appendixes provide method-
ological and supporting details about the committee's sources of informa-
tion and its approach. Appendix E lists the interviewed executives, whose
observations helped the committee to understand the processes by which IT
projects are planned, implemented, and evaluated.
At the macroeconomic level, the committee was concerned about the
constraining effects of looking at services from the traditional perspectives
of goods-production (Chapter 1~. At present, most of the terminology,
methodology, and data for analyzing productivity (and performance) derive
from earlier studies in the goods-producing industries, but to the committee,
most of these seemed inadequate for understanding trends in the service
sector. For example, whereas productivity in goods-producing activities is
measured in terms that refer to relatively concrete units of output, dollar
sales, or profits, performance in services may relate to more subjective
quantities such as timing, quality, comfort, or convenience. Measurement
difficulties are a theme that runs through the report.
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IMPACT OF IMFORMATION TECHNOLOGY AT THE MACROECONOMIC LEVEL 49
NOTES AND REFERENCES
1This figure is for checks cleared, deposits processed, and cash distributed by human
tellers. Cash distributed by automated teller machines is not included. Data reported in 1992
by The Global Institute of McKinsey and Company (see Box 1.3).
2See, for example, Baily, M., and R. Gordon, 1986, "The Productivity Slowdown: Mea-
surement Issues and the Explosion of Computer Power," pp. 347-431 in Brookings Papers on
Economic Activity, W. Brainard and G. Perry (eds.), Brookings Institution, Washington, D.C.;
Roach, Stephen S., 1988, "Technology and the Services Sector: America's Hidden Competitive
Challenge," in Technology in Services, Bruce R. Guile and James Brian Quinn (eds.), National
Academy Press, Washington, D.C.; Roach, Stephen S., 1991, "Services Under Siege: The
Restructuring Imperative," Harvard Business Review, September-October, pp. 82-91; and Strassmann,
P., 1990, The Business Value of Computers, Information Economics Press, New Canaan, Conn.
3A paper by Paul Attewell that was brought to the attention of the committee while this
report was in press addresses some of these issues. See Attewell, Paul. 1994. "Information
Technology and the Productivity Paradox," in Understanding the Productivity Paradox: Or-
ganizational Linkages, Douglas H. Harris (ed.), National Academy Press, Washington, D.C., in
preparation.
40ne variant of this idea suggests that IT has transformed the way business is conducted
and is essential to competitive success, but the changes it has facilitated do not raise the
overall output of the economy. For example, individual companies can use IT to target their
marketing campaigns more effectively, but overall industry sales are not affected and so nei-
ther is productivity measured at the industry level.
5For a discussion of the slowdown in the United States and other countries, see Baumol,
William J., Sue Anne Batey Blackman, and Edward N. Wolff, 1989, Productivity and Ameri-
can Leadership: The Long View, MIT Press, Cambridge, Mass.; and Baily, Martin N., and
Alok K. Chakrabarti, 1988, Innovation and the Productivity Crisis, Brookings Institution,
Washington, D.C. However, note that U.S. productivity growth rates that lag behind those of
its international competitors are a distinct concern for U.S. policymakers, even though U.S.
base productivity levels may still be higher than those of its competitors.
6See, for example, Kendrick, J.W., 1987, "Service Sector Productivity," Business Eco-
nomics, April, pp. 18-24.
7David, Paul A. 1990. "The Dynamo and the Computer: An Historical Perspective on
the Modern Productivity Paradox," American Economic Review, May, pp. 355-361.
8Brynjolfsson, Erik, and Lorin Hitt. 1993. "Is Information Systems Spending Produc-
tive? New Evidence and New Results," MIT Sloan School of Management, Working Paper
3571-93, September 24. (To appear in Proceedings of the 14th International Conference on
Information Systems.)
9The part of the government sector that is subtracted is "general government." This
includes the salaries of government workers in the various federal, state, and local agencies.
The output of "government enterprises," such as the Postal Service and the Tennessee Valley
Authority, are included in the business sector of the economy.
1OThe capital goods purchased by an industry are not subtracted from the gross output of
the industry. Value added in an industry reflects the payments to both labor and capital inputs
to the industry.
1lOne difficulty is that there is not a direct match between products and industries.
Plants in several industries cast their own steel products, for example. An industry deflator
should be based on the prices of the products that are produced by the plants that are classified
within that industry.
12Also included in Table 1.1 is productivity for the government sector, although any
productivity that shows up in the data is purely the result of shifts in the composition of
government activities. By assumption there is no productivity growth within government
activities.
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so
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
13The narrowly defined services sector consists of hotels and other lodging places, per
sonal services, business services, auto repair and similar services, motion pictures, amusement
and recreation services, health care, legal services, education, and social services. By contrast,
the term service sector is used throughout this report to denote the entire range of service
industries, as noted on the opening page of this chapter.
14Though important when productivity is used as an indicator of living standards, adjust-
ments for changes in product quality can be misleading if the issue at hand is product cost
analysis. For example, if the number of teaching hours per student does not decline, college
costs must rise as quickly as faculty salaries, whether or not the quality of teaching changes.
15Not everyone agrees that claims processing has speeded up. There have been com-
plaints that some insurance companies have delayed payments.
16For example, the GDP originating in the commercial banking industry per full-time
employee in 1980 ($37,600 in 1982 dollars) was virtually identical to that in 1988 ($37,900 in
1982 dollars). This small change was due entirely to a different structure in the commercial
banking industry.
17The use of gross margin weighting as an approximation of labor input weighting is
appropriate as long as labor costs represent a significant portion of gross margins and the
elements of margins do not change over time.
18The difficulties that remain involve clarifying some basic conceptual problems of de-
fining output for some service industries and filling gaps in data available. With regard to
data, more and improved data are needed on prices, value of output, capital, and material input.
The BLS and other government statistical agencies have undertaken initiatives to expand the
coverage in the service sector, and the results of these efforts should lead to better and more
comprehensive industry measures. Collection of more measures of service industry prices,
expanded data on hours worked that provide more disaggregation, and continued work on
public-sector productivity by BLS are but a few examples. However, some areas e.g., educa-
tion, entertainment, legal and social services, and many segments of medical services present
such severe conceptual and data problems that appropriate solutions may be a long time in
coming. Additional resources may have only a limited effect until the conceptual problems
can be dealt with.
In expanding the number of industries for which measures are prepared, the BLS has
had to take these problems, among others, into consideration, and this has limited the number
of service industries for which measures have been developed. Nevertheless, adequate mea-
sures of productivity have been developed for many service industries. The problems of
measuring productivity are different for each of the various service industries, and the ap
proaches followed vary.
19The recovery of 1993 is widely believed to be relatively weak by historical standards.
For example, unpublished data from the Bureau of Labor Statistics, U.S. Department of Labor,
indicate that jobs in the ninth quarter of this recovery rose by 0.3 percent as compared to their
nadir in the first quarter of 1991. By comparison, the corresponding figure for the eight
previous recessions is 6.8 percent. In this recovery, manufacturing firms seem to be relying
more on overtime than on new hiring to meet expanding demand for goods, while service firms
seem to be relying more on hiring part-time workers with few benefits (for one example, see
Swoboda, Frank, 1992, "In Omaha, the Underside of a Jobs Promise," Washington Post, Octo-
ber 25, p. H-1). The result in manufacturing has been fewer jobs with longer work weeks, and
in services more jobs with shorter work weeks (see Uchitelle, Louis, 1993, "Fewer Jobs Filled
As Factories Rely on Overtime Pay," New York Times, May 16, p. 1). Even strong companies
are cutting labor costs to maintain or increase profit margins (see Uchitelle, Louis, 1993,
"Strong Companies Are Joining Trend to Eliminate Jobs," New York Times, July 26).
20Recent data suggest that the slowdown in growth of U.S. productivity has been accom-
panied by a slowdown in that of the other leading industrial countries, and that the percentage
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IMPACT OF IMFORMATION TECHNOLOGYAT THE MACROECONOMIC LEVEL 51
decline in Japan has been almost exactly as great as that in the United States. Further, all
industrial countries have moved closer to the United States in levels of productivity and GDP
per capita, although they have not caught up with this country in real terms (i.e., in terms of
purchasing power parity exchange rates). With the race narrowing, it is a tautology that the
laggards must be running faster than the leader, thus explaining how the United States can be
ahead of everyone else in productivity level, although its productivity growth rate lags behind
those of many of the other countries.
~ . _ _
U.S. Department of Commerce, Bureau of Economic Analysis. 1992. Survey of Cur
rent Business, June, Table 3, "Selected Services Transactions," p. 96.
BIBLIOGRAPHY FOR CHAPTER 1
Brand, Horst, and John Duke. 1982. "Productivity in Commercial Banking: Computers Spur
the Advance," Monthly Labor Review, Vol. 105 (December), pp. 19-27.
Brand, Horst, and Zaul Ahmed. 1986. "Productivity in Beauty and Barber Shops," Monthly
Labor Review, Vol. 109.
Carnes, Richard B. 1978. "Laundry and Cleaning Services Pressed to Post Productivity
Gains." Monthly Labor Review, Vol. 101 (February), pp. 38-42.
Carnes, Richard B., and Horst Brand. 1977. "Productivity and New Technology in Eating and
Drinking Places," Monthly Labor Review, Vol. 100 (September), pp. 9-15.
Dean, Edwin, and Kent Kunze. 1990. "Productivity Measurement in Service Industries,"
Output Measurement in the Services Sector, National Bureau of Economic Research,
Cambridge, Mass.
Duke, John. 1977. "New-Car Dealers Experience Long-Term Gains in Productivity," Monthly
Labor Review, Vol. 100 (March), pp. 29-33.
Friedman, Brian. 1984. "Productivity in the Apparel and Accessories Stores Industries,"
Monthly Labor Review, Vol. 107 (October), pp. 37-42.
Friedman, Brian, and John L. Carey. 1975. "Productivity in Gasoline Stations, 1958-1973,"
Monthly Labor Review, Vol. 98 (February), pp. 32-36.
Kutscher, Ronald, and Jerome A. Mark. 1983. "The Service-Producing Sector: Some Com-
mon Perceptions Reviewed," Monthly Labor Review, Vol. 106 (April), pp. 21-24.
Mark, Jerome A. 1982. "Measuring Productivity in the Services," Monthly Labor Review,
Vol. 105 (June), pp. 3-8.
Mark, Jerome A. 1988. "Measuring Productivity in Service Industries," in Technology in
Services: Policies for Growth, Trade, and Employment, Bruce R. Guile and James Brian
Quinn (eds.), National Academy Press, Washington, D.C.
Mincer, Jacob. 1974. Schooling, Experience and Earnings, Columbia University Press, New
York.
Roach, Stephen S. 1991. "Services Under Siege: The Restructuring Imperative," Harvard
Business Review, September-October, pp. 82-91.
Smith, Anthony D. 1972. The Measurement and Interpretation of Service Output Changes,
National Economic Development Office, London.
Waldorf, William H., Kent Kunze, Lawrence S. Rosenblum, and Michael B. Tannen. 1986.
"New Measures of the Contribution of Education and Experience to U.S. Productivity
Growth," paper presented at annual meetings of American Economic Association, Dec.
28-30, New Orleans, La.
Representative terms from entire chapter:
service sector
