Productivity, Computerization, and Skill Change

Edward N. Wolff
Economic Review, Vol. 87, No. 3, 2002

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Until recently, most studies examining the effect of computerization on productivity have shown little evidence of a payoff to computer investment in terms of productivity growth. Most of these studies have focused on the connection between information technology (IT) or information and communications technology (ICT) and productivity, but few have examined the linkages between IT and broader indicators of structural change. This article helps fill that gap.

The article concentrates on the relation of skills, education, and computerization to productivity growth and other indicators of technological change on the industry level. After reviewing the pertinent literature, the author introduces an accounting framework and model and presents descriptive statistics on post-World War II productivity trends and key variables that have shaped productivity growth patterns during that period. A multivariate analysis on the industry level assesses these variables' influence.

The analysis shows no evidence that the growth of educational attainment has any statistically measured effect on industry productivity growth. The growth in cognitive skills, on the other hand, is significantly related to industry productivity growth though the effect is very modest. In addition, the study finds no econometric evidence that computer investment is positively linked to total factor productivity growth. The author concludes that the effects of IT show up more strongly in terms of measures of structural change rather than in terms of productivity.

August 2002