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We explore the effect of computerization on productivity and output growth using data from 527 large U.S. firms over 1987–1994. We find that computerization makes a contribution to measured productivity and output growth in the short term (using 1-year differences) that is consistent with normal returns to computer investments. However, the productivity and output contributions associated with computerization are up to 5 times greater over long periods (using 5- to 7-year differences). The results suggest that the observed contribution of computerization is accompanied by relatively large and time-consuming investments in complementary inputs, such as organizational capital, that may be omitted in conventional calculations of productivity. The large long-run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s.
Brynjolfsson, E., & Hitt, L. M. (2003). Computing Productivity: Firm-Level Evidence. 85 (4), 793-808. http://dx.doi.org/10.1162/003465303772815736
Date Posted: 27 November 2017
This document has been peer reviewed.