IZA DP No. 7906: Return of the Solow Paradox? IT, Productivity, and Employment in U.S. Manufacturing
published in: American Economic Review, Papers & Proceedings, 2014, 104 (5), 394-399
An increasingly influential "technological-discontinuity" paradigm suggests that IT-induced technological changes are rapidly raising productivity while making workers redundant. This paper explores the evidence for this view among the IT-using U.S. manufacturing industries. There is some limited support for more rapid productivity growth in IT-intensive industries depending on the exact measures, though not since the late 1990s. Most challenging to this paradigm, and our expectations, is that output contracts in IT-intensive industries relative to the rest of manufacturing. Productivity increases, when detectable, result from the even faster declines in employment.