Hostname: page-component-78c5997874-ndw9j Total loading time: 0 Render date: 2024-11-15T15:50:21.271Z Has data issue: false hasContentIssue false
  • English
  • Français

The Growth of ICT and Industry Performance - Manufacturing in the US and UK Compared

Published online by Cambridge University Press:  26 March 2020

Mary O'Mahony  and
Catherine Robinson
Mary O'Mahony*
Affiliation:
National Institute of Economic and Social Research
Catherine Robinson
Affiliation:
National Institute of Economic and Social Research
*
e-mail: m.omahony@niesr.ac.uk
Get access Rights & Permissions [Opens in a new window]

Abstract

UK manufacturing productivity has for a long time lagged behind the US. Explanations put forward for the ‘productivity gap’ include disparities in capital stock levels, the quality of the labour force and different rates of technology adoption. The questions addressed in this paper are, ‘has slower UK up-take of information technology exacerbated the productivity gap? Can this account for the slowdown in the manufacturing sector in the mid-1990s, a period when the US experienced substantial growth?’ Using the growth accounting method and industry data for the period 1988-2000, the paper indicates considerable industry heterogeneity in both the UK and the US, which aggregate sectoral analysis is likely to obscure. The results suggest that whilst the UK continues to lag behind the US in terms of ICT capital shares, differences in rates of growth of ICT capital are minor. Labour quality indicators show positive ICT and non-ICT skilled labour growth and declines in lower skilled categories in both countries, with the UK leading the US in recent years. Thus UK manufacturing has invested significantly in new technology inputs. The paper also shows there are similarities in the cross industry patterns of productivity performance in the two countries but growth rates in the UK are significantly below those in the US across the board. The paper then considers alternative explanations for the slowdown in UK manufacturing productivity in the mid to late 1990s and suggests this may be due to macroeconomic factors peculiar to that period and lags in the adjustments of firms to a changed environment.

Type
Articles
Information
National Institute Economic Review , Volume 184 , April 2003 , pp. 60 - 73
Copyright
Copyright © 2003 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

∗

This work has been jointly funded by a DTI/DfES/Treasury project under the Evidence Based Policy Fund and the European Commission fifth framework grant: Employment prospects in the Knowledge Economy whose support is gratefully acknowledged. It draws on joint work with NIESR colleagues, John Forth, Geoff Mason and Michela Vecchi. A preliminary version of this paper was given at a conference on The Future of Manufacturing, London School of Economics, 1 November 2002.

References

Basu, S. and Fernald, J. (2001), ‘Why is productivity procyclical? Why do we care?’, in Hulten, C.R., Dean, E.R. and Harper, M.J. (eds), New Developments in Productivity Analysis, NBER Studies in Income and Wealth, 63.Google Scholar
Basu, S., Fernald, J. and Shapiro, M. (2001), ‘Productivity growth in the 1990s: technology, growth, utilization or adjustment?’, NBER Working Paper no. 8359.Google Scholar
Berndt, E. R. and Morrison, C. (1995), ‘High-tech capital formation and economic performance in US manufacturing industries. An exploratory analysis’, Journal of Econometrics, 65, pp. 9–43.CrossRefGoogle Scholar
Black, S. and Lynch, L. (2001), ‘How to compete: the impact of workplace practices and information technology on productivity’, Review of Economics and Statistics, 83, pp. 434–445.CrossRefGoogle Scholar
Bresnahan, T.F., Brynjolfsson, E. and Hitt, L.M. (2002), ‘Information technology, workplace organisation and the demand for skilled labor: firm level evidence’, Quarterly Journal of Economics, 117, pp. 339–396.CrossRefGoogle Scholar
Bosworth, D. (1999), ‘Empirical evidence of management skills in the UK’, Skills Task Force, Research Paper 18.Google Scholar
Broadberry, S.N. (1997), The Productivity Race: British Manufacturing in International Perspective, 1850-1990, Cambridge University Press.CrossRefGoogle Scholar
Broersma, L. and McGuckin, R.H. (1999), ‘The impact of computers on productivity in the trade sector: explorations with Dutch microdata’, GGDC Working Paper DG-45, University of Groningen.Google Scholar
Colecchia, A. and Schreyer, P. (2001), ICT Investment and Economic Growth in the 1990s: Is the United States a Unique Case?, Paris, OECD.Google Scholar
Domar, E.D. (1961), ‘On the measurement of technological change’, Economic Journal, LXXI, pp. 709–729.Google Scholar
Engineers Employers Federation (2001), ‘Catching up with Uncle Sam - The EEF final report on US and UK manufacturing productivity’, available at http://www.eef.co.uk/Google Scholar
Fare, R., Grosskopf, S. and Kokkelenberg, K. (1989), ‘Measuring plant capacity, utilisation and technical change: a non-parametric approach’, International Economic Review, 303, pp. 655–666.CrossRefGoogle Scholar
Gordon, R. (2000), ‘Does the ‘New Economy’ measure up to the great inventions of the past?’, Journal of Economic Perspectives, 14, 4, pp. 49–74.CrossRefGoogle Scholar
Greenan, N. and Mairesse, J. (1996), ‘Computers and productivity in France: some evidence’, Cambridge, MA, NBER Working Paper no. 5836.Google Scholar
Greenan, N. and Mairesse, J. (2002), ‘How do new organisational practices change the work of blue collars, technicians and supervisors? Results from matched employer-employee survey for French manufacturing’, mimeo, Paris, INSEE-CREST.Google Scholar
Griliches, Z. (ed.) (1992), Output Measurement in the Service Sector, Studies in Income and Wealth, NBER, University of Chicago Press.CrossRefGoogle Scholar
Hulten, C.R, (2001), ‘Total factor productivity: a short biography’, in Hulten, C.R., Dean, E.R. and Harper, M.J. (eds), New Developments in Productivity Analysis, NBER Studies in Income and Wealth, 63.CrossRefGoogle Scholar
Jorgenson, D.W. (2001), ‘Information technology and the US economy’, American Economic Review, 91, 1, pp. 1–32.CrossRefGoogle Scholar
Jorgenson, D.W. and Fraumeni, B. (1989), ‘The accumulation of human and non-human capital, 1948-84’, in Lipsey, R.E. and Tice, H.S. (eds), The Measurement of Savings, Investment and Wealth, Chicago, University of Chicago Press, p. 227–282.Google Scholar
Jorgenson, D.W., Gallop, F.M. and Fraumeni, B. (1987), ‘Productivity and US Economic Growth’, Cambridge MA, Harvard University Press.Google Scholar
Jorgenson, D.W. and Griliches, Z. (1967), ‘The explanation of productivity change’, Review of Economic Studies, 34, pp. 249–283.CrossRefGoogle Scholar
Jorgenson, D.W. and Stiroh, K. (2000), ‘Raising the speed limit: U.S. economic growth in the information age’, Brookings Papers on Economic Activity, 1, pp, 125–211.Google Scholar
Lehr, B. and Lichtenberg, F.R. (1999), ‘Information technology and its impact on productivity: evidence from government and private data sources, 1977-1993’, Canadian Journal of Economics, 32, 2, April, pp. 335–362.CrossRefGoogle Scholar
Mason, G., Robinson, C., Forth, J. and O'Mahony, M. (2003), ‘Industry-level estimates of ICT and non-ICT employment, qualifications and wages in the UK and USA, 1979-2000’, mimeo, National Institute of Economic and Social Research.Google Scholar
Melka, J., Nayman, L., Zignago, S. and Mulder, N. (2002), ‘Is ICT the key to success? An analysis of ICT impact on French economic growth’, EPKE Working Paper 10, available at http://www.niesr.ac.uk/epke/working_papers.htmlGoogle Scholar
Nadiri, M.I. and Prucha, I.R. (2001), ‘Dynamic factor demand models and productivity analysis’, in Hulten, C.R., Dean, E.R. and Harper, M.J. (eds), New Developments in Productivity Analysis, NBER Studies in Income and Wealth, 63.Google Scholar
Oliner, S.D. and Sichel, D.E. (1994), ‘Computers and output growth revisited: how big is the puzzle?’, Brookings Papers on Economic Activity 2, pp. 273–317.CrossRefGoogle Scholar
Oliner, S.D. and Sichel, D.E. (2000), ‘The resurgence of growth in the late 1990s: is information technology the story?’, Journal of Economic Perspectives, 14, 4, pp. 3–22.CrossRefGoogle Scholar
Oliner, S.D. and Sichel, D.E. (2002), ‘Information technology and productivity: where are we now and where are we going?’ Board of Governors of the Federal Reserve, Finance and Economics Discussion Paper no. 2002-29.Google Scholar
O'Mahony, M. (1999), Britains Productivity Performance 1950-1996. An International Perspective’, London, National Institute of Economic and Social Research.Google Scholar
O'Mahony, M. and de Boer, W. (2002), ‘Britain's relative productivity performance: updates to 1999’, Final Report to DTI/Treasury/ONS, mimeograph.Google Scholar
O'Mahony, M. and Timmer, M. (2002), ‘Measuring capital input’, EPKE Technical Note 1, available at http://www.niesr.ac.uk/epke/working_papers.htmlGoogle Scholar
Oulton, N. (2001), ‘ICT and productivity growth in the United Kingdom’, Bank of England Working Paper no. 140.Google Scholar
Piore, M.J and Sabel, C.F. (1984), The Second Industrial Divide. Possibilities for Prosperity, Basic Books.Google Scholar
Prais, S.J. and Wagner, K. (1988), ‘Productivity and management: the training of foremen in Britain and Germany’, National Institute Economic Review, 123, pp. 23–47.CrossRefGoogle Scholar
Proudfoot Consulting (2002), ‘Untapped potential - the barriers to optimum corporate productivity’, available from http://www.proudfootconsulting.com/Google Scholar
Schreyer, P. (2000), ‘The contribution of information and communication technology to output growth: a study of the G7 Countries’, OECD Directorate for Science, Technology and Industry, STI Working Paper no. 2000/2.Google Scholar
Sena, V. (2001), ‘The generalized Malmquist index and capacity utilization change: an application to the Italian manufacturing, 1989-1994’, Applied Economics, 33, pp. 1–9.CrossRefGoogle Scholar
Siegel, D. (1997), ‘The impact of computers on manufacturing productivity growth: a multiple-indicators, multiple-causes approach’, Review of Economics and Statistics, pp. 68–78.CrossRefGoogle Scholar
Stiroh, K. (2002), ‘Are ICT spillovers driving the New Economy?’, Review of Income and Wealth, 48, 1, pp. 33–57.Google Scholar
van Ark, B. (2002), ‘Measuring the New Economy: an international perspective’, Review of Income and Wealth, 48, 1, pp. 1–14.CrossRefGoogle Scholar
van Ark, B., Inklaar, R. and McGuckin, R.H. (2002), ‘“Changing gear” productivity, ICT and service industries: Europe and the United States’, mimeo.Google Scholar
Vaze, P. (2002), ‘ICT deflation and growth: a sensitivity analysis’, Economic Trends, July.Google Scholar