The Change Mariner: Information Technology May Have Cured Low Service-Sector Productivity

February 12, 2004

Information Technology May Have Cured Low Service-Sector Productivity

But the recent evidence compiled by Mr. Triplett and Mr. Bosworth shows that information technology may just be the cure for Baumol's disease.
They found that from 1995 to 2001, labor productivity in services grew at a 2.6 percent rate, outpacing the 2.3 percent rate for goods-producing sectors. Furthermore, this phenomenon was widespread: 24 out of the 29 service industries they studied exhibited growth in labor productivity after 1995, and 17 experienced accelerated growth.

Interestingly enough, the service industries where overall productivity did not grow were hotels, health, education and entertainment. These are all examples where customers tend to perceive that more labor is associated with higher quality, as Mr. Baumol had originally suggested.

Robert Gordon of Northwestern University and others have pointed out that information-technology-producing industries have had a big effect on aggregate productivity growth since they have themselves been extraordinarily productive. Indeed, semiconductor manufacture and the computer and electronics industry lead the pack among manufacturing industries with respect to productivity.

Corporate Portals: Revolutionizing Information Access to Increase Productivity and Drive the Bottom Line
AMACOM

Amazon Price: $20.97

Productivity, Inequality, and the Digital Economy: A Transatlantic Perspective
MIT Press

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Information Technology, Corporate Productivity, and the New Economy
Quorum Books

Amazon Price: $64.95

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