The CEA on Productivity
By Arnold Kling
From the 2007 Economic Report of the President:
the surge in productivity in the late 1990s appears to be a story of growth in industries making and using IT capital…efficiency growth since 2000 has been particularly strong in the high-tech sector, but that it has also been strong in the distribution sector, which includes retail and wholesale trade, transportation, and warehousing. Finance and business services also showed strong efficiency growth and hence strong productivity growth. Manufacturing, which has made small investments in IT capital compared to the other sectors shown, has had the slowest recent growth in efficiency.
UPDATE: commenter Nathan Smith asks,
Question: If computers are the reason for productivity growth, why didn’t the productivity surge occur in Europe and Japan? Those places use a lot of computers, too.
This is an excellent question. The Brad DeLong answer is that he expects Europe to catch up soon. The McKinsey Global Institute answer is that the U.S. allows much more vigorous competition in the retail sector, and until other countries reduce their protection of incumbent businesses, their productivity will continue to lag.