Oliner and Sichel find that labor productivity growth was 1.04 percentage points faster in the late 1990s than in the early 1990s. Second, the rate of improvement in the efficiency with which the economy produces IT capital increased substantially during the late 1990s. The rise in this growth rate, sometimes called multifactor productivity growth, contributed 0.37 percentage points to the increase in labor productivity growth. The remarkable conclusion from this analysis is that the widespread adoption of IT in the United States, together with the increased efficiency in its production, accounts for about three-quarters of the rise in labor productivity growth, a quantity of about 0.8 percentage points. Whether or not the rapid productivity growth observed at the end of the 1990s will continue is an important and open question.
Economic research suggests several insights into the answer.
The first relates to the business cycle. When the economy comes out of a recession and moves into a boom, productivity growth rates tend to rise. The flip side of this business cycle logic is that to the extent that the current expansion is coming to an end, one might expect productivity growth to be low in the near term. We may have to wait until the current cycle has run its course in order to measure the sustained impact of the New Economy. This view is supported by the pattern of multifactor productivity growth in the semiconductor sector.