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BPEA | Spring 2007

Explaining a Productive Decade

Daniel E. Sichel,
Headshot of Dan Sichel
Daniel E. Sichel Professor of Economics - Wellesley College
Stephen D. Oliner, and
SDO
Stephen D. Oliner Board of Governors of the Federal Reserve System
Kevin J. Stiroh
KJS
Kevin J. Stiroh Federal Reserve Bank of New York
discussants: N. Gregory Mankiw and
N. Gregory Mankiw Robert M. Beren Professor of Economics - Harvard University
Martin Neil Baily

Spring 2007


PRODUCTIVITY GROWTH IN THE United States rose sharply in the mid-1990s,
after a quarter century of sluggish gains. That pickup was widely documented,
and a relatively broad consensus emerged that the speedup in the
second half of the 1990s was importantly driven by information technology
(IT).1 After 2000, however, the economic picture changed dramatically, with
a sharp pullback in IT investment, the collapse in the technology sector,
the terrorist attacks of September 11, 2001, and the 2001 recession. Given
the general belief that IT was a key factor in the growth resurgence in the
mid-1990s, many analysts expected that labor productivity growth would
slow as IT investment retreated after 2000. Instead labor productivity accelerated
further over the next several years. More recently, however, the
pace of labor productivity growth has slowed considerably.