The acceleration in U.S. total factor productivity after 1995: The role of information technology

After the mid-1990s, labor and total factor productivity (TFP) accelerated in the United States. A growing body of research has explored the robustness of the U.S. acceleration, generally concluding that it reflects an underlying technology acceleration. This research, along with considerable anecdotal and microeconomic evidence, suggests a substantial role for information and communications technology (ICT).1

In this article, we briefly discuss the results of socalled growth accounting at the aggregate level. We then look more closely at the experience since the mid- 1990s, when TFP accelerated. We look at data on which industries account for the TFP acceleration: Were the 1990s a time of rising total factor productivity growth outside of the production of ICT? Our industry data strongly support the view that a majority of the TFP acceleration reflects an acceleration outside of the production of ICT goods and software.2 Even when we focus on arguably “well-measured” sectors (Griliches 1994; Nordhaus 2002), we find a substantial TFP acceleration outside of ICT production.