Productivity Growth in the 2000s

A near-consensus sees the cause of the productivity speedup of the 1990s in the information technology (IT) sector. The pace of invention and innovation in that sector generated real price declines of between ten and twenty percent per year for decades. Increased productivity in the IT capital-goods-producing sector, coupled with real capital deepening as the quantity of investment bought by a dollar of nominal savings grows, has driven the productivity speedup. Will this higher level of productivity growth persist? The answer appears to be "probably." The most standard of applicable growth models predicts that the social return to IT investment would have to suddenly drop to near zero for the upward jump in productivity growth to reverse itself. More complicated models that focus in more detail on the determinants of investment spending or on the sources of increased total factor productivity strengthen, not weaken, forecasts of productivity growth over the next decade.