manufacturing processes for example, to permit vehicles based on different platforms to be produced on the same assembly line. one study ( stiroh, 2002 ) found that a majority of u. s. industries experienced an acceleration of productivity in the latter part of the 1990s. significantly, the study also found the gains to be the greatest in industries that use it capital most intensively. undoubtedly, the it revolution and the resurgence of productivity in the united states after 1995 were closely connected. however, the technology - based explanation of increased productivity growth does raise a couple of puzzles ( see, for example, mckinsey and company, 2001 and 2005, and basu and others, 2003 ). first, the united states was not the only country to have access to the new technologies or to have experienced a rapid expansion in it investment ; other industrial countries also invested heavily in these technologies in the 1980s and 1990s. yet, with a few exceptions, the available data show that productivity growth in other advanced countries has not increased to the extent seen in the united states. second, as i have noted, productivity growth increased very rapidly earlier this decade and has continued to rise at a solid pace, even though it investment declined sharply after the stock prices of high - tech firms plummeted in 2000. more generally, as a historical matter, increases in it investment have not always been followed in short order by increases in productivity growth. this observation raises the question of why, in some cases, the putative productivity benefits of investments in new technologies do not occur until years after those investments are made. in regard to the first puzzle - the fact that the united states has enjoyed greater productivity growth in recent years than other advanced countries - the comparison with europe is particularly interesting. throughout most of the post - world war ii period, productivity growth in europe exceeded that in the united states, at first because of the rapid gains during the postwar reconstruction and then later because of a gradual convergence of european technology and business practices to american standards. by one estimate, european productivity increased from 44 percent of the u. s. level in 1950 to near - equality with the united states by 1995 ( gordon, 2004 and 2006 ). however, the available data suggest that, since about 1995, productivity growth in european nations has slowed, on average, in contrast to the pickup experienced in the united states. these trends have led to an increasing divergence in productivity levels in the united states and europe ( see van ark and inklaar, 2005 ).

ben s bernanke : productivity remarks by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before leadership south carolina, greenville, south carolina, 31 august 2006. * * * one of the most important economic developments in the united states in the past decade or so has been a sustained increase in the growth rate of labor productivity, or output per hour of work. from the early 1970s until about 1995, productivity growth in the u. s. nonfarm business sector averaged about 1 - 1 / 2 percent per year - a disappointingly low figure relative both to u. s. historical experience and to the performance of other industrial economies over the same period. 1 between 1995 and 2000, however, the rate of productivity growth picked up significantly, to about 2 - 1 / 2 percent per year - a figure that contributed to the view, held by many at the time, that the united states might be entering a new economic era. talk of the " new economy " faded with the sharp declines in the stock valuations of high - tech firms at the turn of the millennium. yet, remarkably, productivity accelerated further in the early part of this decade. from the end of 2000 to the end of 2003, productivity rose at a 3 - 1 / 2 percent annual rate and, even after recent downward revisions to the data, it is estimated to have increased at an average annual rate of 2 - 1 / 4 percent since the end of 2003. these advances were achieved despite adverse developments that included the 2001 recession, the terrorist attacks of september 11, corporate governance scandals, and in the past few years, devastating hurricanes and very substantial increases in the cost of energy. why is the rate of productivity growth so important? economists agree that, in the long run, productivity growth is the principal source of improvements in living standards. the logic is simple : in the long run, what we can consume as a nation is closely tied to how much we can produce. the link between the growth of productivity and the standard of living of the average person is somewhat looser in the short - to - medium run, because variation in factors such as the share of the population that is employed, the division of income between capital and labor, and the distribution of each type of income across households also matters. nevertheless, the rate of productivity growth influences the economy in important ways even in the short run, affecting key variables such as the growth rate of output, employment gains, and