Arnold Kling

Growth and Competition

Arnold Kling, Great Questions of Economics
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Another McKinsey Quarterly article on productivity argues that six sectors accounted for the acceleration in productivity growth in the late 1990's.

managerial and technological innovations in only six highly competitive industries--wholesale trade, retail trade, securities, semiconductors, computer manufacturing, and telecommunication--were the most important causes

The authors do not believe that increased spending on information technology is what accounts for the productivity increases. They point out that some other industries--notably hotels, long distance telephony, and retail banking--made large investments in computers and communications but nonetheless showed little productivity gain.

the most important cause of the productivity acceleration after 1995 was fundamental changes in the way companies deliver products and services...high or increasing competitive intensity was essential to the spread of innovation

Discussion Question. If competitive instensity is a key determinant of productivity growth, should public policy be striving to increase competitive intensity in certain fields, such as education?

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