Innovation Fact of the Week: IT Adoption Boosted U.S. Productivity Growth by 1.4 Percentage Points Per Year From 2004 to 2014

September 16, 2016

Rapid adoption of information technologies has propelled U.S. labor productivity growth since the 1960s, with especially outsized impacts in the late 20th century. Unfortunately, slow productivity growth in the wake of the recent Great Recession has prompted many to wonder whether the current generation of information technologies has run out of productivity-driving steam.

David Byrne, principal economist at the Federal Reserve System, and Carol Corrado, an economist at Georgetown University, find that from 2004 to 2014 IT investment and adoption contributed 1.4 percentage points annually to U.S. productivity growth. But this compares to an economy-wide average of just a half percentage point annual productivity growth in the post-recession period of 2010 to 2015. Their findings suggest that IT has supported the U.S. economy in recent years and is partially responsible for counteracting the negative productivity effects induced by and since the Great Recession.

IT remains fundamental in increasing living standards for Americans, and its impressive productivity returns have been overshadowed by other weakening sectors of the economy. To restore robust productivity growth, the federal government should craft an explicit national productivity strategy that makes faster productivity growth the principal goal of economic policy. For more on this, see Rob Atkinson’s recent ebook, Think Like an Enterprise: Why Nations Need Comprehensive Productivity Strategies.