The Internet's Contribution to U.S. Productivity Growth

Goss, Ernest
October 2001
Business Economics;Oct2001, Vol. 36 Issue 4, p32
Academic Journal
How much has the Internet contributed to recent productivity performance in the U.S. economy? While Oliner and Sichel (2000), using "back of the envelope" calculations, found that it had no impact, Litan and Rivlin (2001), using "judgmental estimates," found the Internet's contribution to productivity growth to be 0.20.4 percent per year over the last half of the 1990s. This study examines the impact of actual Internet usage by industry for 1997, 1998, and 1999 by using pooled times-series and cross-section data in a production function framework. Its results suggest that job-related Internet usage had a positive and statistically significant impact on productivity growth of roughly 0.25 percent per year. Furthermore, the productivity enhancing power of the Internet is found to differ according to the information technology (IT) intensity of the industry. For those industries characterized by less intensive use of IT, it is estimated that Internet usage added 0.52 percent annually to productivity growth. For IT intensive industries, it contributed less than 0.04 percent. Going forward, it is likely that the Internet will continue to enhance U.S. productivity growth, especially among non-IT intensive industries.


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