Impacts of Information Technology on Productivity and Linkage of the US Economy

This paper is devoted to the understanding of structural changes in the US economy in the context of interindustry linkage. Structural changes are studied in terms of productivity and inter-industry relations. While the former is frequently studied in the growth accounting framework of the mainstream economics, the latter is not paid due attention. While conventional growth accounting has developed to trace detailed industry sources, its methodology isolates each industry from the rest to some extent. On the other hand, the input-output accounting framework is a generalized output accounting with inter-industry relations as its essential key features and can be extended smoothly to productivity analysis.

This thesis reaches three conclusions. First, the I-O accounting produces comparable results as the growth accounting in productivity analysis. From 1987 to 2000, the growth accounting shows the average annual rate of productivity growth rate of 0.90 while the I-O accounting shows that of factor saving of 1.23 percent. The fast growth in productivity and factor saving is not only noticeable in size but also qualitatively significant in the sense that active output growth was not accompanied by price increases. Second, Information Technology industries made substantial contributions to reduce inflation as well as to productivity growth. The IT sector contributes to productivity growth of about 40 percent in growth-accounting and to factor saving in I-O analysis as of about 15 percent from 1987 to 2000. The inter-industry context of I-O accounting provides a fertile ground to answer many policy-oriented questions about the economy. The outsourcing (domestically or internationally) of the manufacturing sector is an important issue in the US economy regarding the job loss. As the third part of the conclusion, the paper raises and confirms a hypothesis that there is a division of labor between sectors regarding employment and productivity. That is, the manufacturing sector contributes significantly to productivity, while the services sector does so to employment.