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

Author

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  • Robert J. Gordon
  • Hassan Sayed
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.

Suggested Citation

  • Robert J. Gordon & Hassan Sayed, 2020. "Transatlantic Technologies: The Role of ICT in the Evolution of U.S. and European Productivity Growth," NBER Working Papers 27425, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27425
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    References listed on IDEAS

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    6. Murciano-Goroff, Raviv & Zhuo, Ran & Greenstein, Shane, 2021. "Hidden software and veiled value creation: Illustrations from server software usage," Research Policy, Elsevier, vol. 50(9).
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    8. David Martinez Turegano, 2020. "Sectoral productivity vis-à-vis the US and heterogeneity within the EU27: the role of firm size distribution and firm demographics," JRC Research Reports JRC122059, Joint Research Centre.

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    More about this item

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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