processes - for example, to permit vehicles based on different platforms to be produced on the same assembly line. one study found that nearly two - thirds of u. s. industries, comprising about 70 percent of total employment, 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 using ict capital most intensively ( stiroh, 2002 ). undoubtedly, the ict revolution and the productivity resurgence in the united states after 1995 were closely connected, but several puzzles have arisen that challenge the view that ict investment leads mechanically to higher productivity. first, the united states was not the only country to see a rapid expansion in ict investment, as other industrial countries also invested heavily in these technologies in the 1980s and 1990s. yet, with a few exceptions, productivity growth in other advanced countries has not increased recently to the extent seen in the united states. the comparison with the member states of the european union is particularly interesting. throughout most of the post - world war ii period, labor productivity growth in europe exceeded that in the united states, reflecting, first, rapid gains during the postwar reconstruction and then a gradual convergence of european technology and business practices to american standards. by one estimate, on average, european productivity increased from 44 percent of the u. s. level in 1950 to 94 percent in 1995 ( gordon, 2004 ). however, since about 1995, productivity growth in europe has slowed, in contrast to the u. s. experience, and productivity levels in the united states and europe have begun to diverge. 3 researchers have made the important point that u. s. - european differences in productivity growth do not appear to have been particularly large in the ict - producing sectors, where u. s. strengths in the development of information technologies have been offset by european leadership in communications. rather, the u. s. advantage has been most evident in the ict - using sectors, which have performed better in the united states than elsewhere. what accounts for the apparent u. s. advantage in applying ict to a wide range of industries? one popular hypothesis, put forth by alan greenspan ( 2000 ) and martin feldstein ( 2001 ), holds that european economies have been less successful in applying new technologies because of a relatively heavy regulatory burden that inhibits flexibility. for example, taking full advantage of new information and communication technologies may require extensive reorganization of work practices and the reallocation of workers among firms and industries. regulations that raise

. researchers have also found some evidence that the technological frontier may not have advanced as quickly recently as it did in earlier years ; as one indicator, the price of computing power has recently declined more slowly than it did in the 1980s and 1990s. these caveats notwithstanding, i think the productivity optimists have a good case. computing power may not be falling in price quite so rapidly now as in the late 1990s, but a dollar nevertheless buys a great deal more computational capacity today than it did even five years ago. and if rapidly improving information and communication technologies are truly general - purpose technologies, history suggests that they will continue to stimulate new ways of producing and of organizing production ( delong, 2002 ). in particular, the enormous expansion in available computing power has already contributed to advances in other emerging fields, such as biotechnology. moreover, even if the technological frontier advances more slowly during the next few years, further diffusion of the existing technologies and applications can continue to raise aggregate productivity. the available evidence suggests that this diffusion process is not complete. for example, a survey conducted in 2003 by the institute of supply management and forrester research found that most see basu and fernald ( 2001 ) for a discussion. managers consider their company to be at a relatively early stage in exploiting the potential gains from using the internet for their purchasing activities. in a more formal analysis, jason cummins and giovanni violante constructed a measure of the “ technological gap ” in u. s. industry, defined as the difference in efficiency between state - of - the - art capital equipment and the actual mix of equipment held by firms ( cummins and violante, 2002 ). as of 2000, the last year included in their study, the authors found this gap to be 40 percent and rising, suggesting that substantial opportunities remain for increasing productivity. this gap is unlikely to have declined much since 2000, for even if the rate of technological progress has slowed, so has the pace of ict investment. i draw two conclusions : first, on the whole, the relatively optimistic estimates of secular productivity growth espoused by leading scholars in the field do not seem unreasonable, so that, for the longer term, continued growth in productivity in the range of, say, 2 percent to 2 - 1 / 2 percent per year probably represents a good baseline assumption. second, qualifying the first conclusion, the range of uncertainty in forecasts of productivity growth is inevitably quite wide. for example, a 2004 study by three leading scholars produced an estimate