Computers, Obsolescence, and Productivity

This paper examines the role that computers have played in boosting U.S. economic growth in recent years. The paper focuses on two effects - the effect of increased productivity in the computer-producing sector and the effect of investments in computing equipment on the productivity of those who use them - and concludes that together they account for almost all of the recent acceleration in U.S. labor productivity. In calculating the computer-usage effect, standard NIPA measures of the capital stock are inappropriate for growth accounting because they do not account for technological obsolescence; this occurs when a machine that is still productive is retired because it is no longer near the technological frontier. Using a theoretical framework that explicitly accounts for technological obsolescence, alternative estimates of the computer capital stock are developed that imply larger effects on growth of computer capital accumulation than are suggested by the NIPA stocks