Productivity, Computerization, and Skill Change

Federal Reserve Bank of Atlanta E C O N O M I C R E V I E W Third Quarter 2002 R obert Solow was, perhaps, the first to point out the anomaly between productivity growth and computerization. Indeed, he quipped that we see computers everywhere except in the productivity statistics. As we shall see, industries that have had the greatest investment in computers (namely, financial services) have ranked among the lowest in terms of conventionally measured productivity growth. Moreover, at least until recently, there has been little evidence of a payoff to computer investment in terms of productivity growth. However, another recent phenomenon of considerable visibility has been the rapid degree of industrial restructuring among U.S. corporations. This paper argues that standard measures of productivity growth are only one indicator of structural change. There are others, such as changes in direct input and capital coefficients. Changes in occupational mix and the composition of inputs were greater in the 1980s than in the preceding two decades. This pattern coincides with the sharp rise in computerization. Though most of the literature has focused on the connection between information technology (IT) or information and communications technology (ICT) and productivity, little work has been conducted on the linkage between IT and broader indicators of structural change (with a few exceptions noted below). One purpose of this paper is to help fill this gap. Indeed, this study finds evidence from regresProductivity, Computerization, and Skill Change