International Comparisons of Productivity Growth: The Role of Information Technology and Regulatory Practices

49 Pages Posted: 10 Jun 2002

See all articles by Christopher Gust

Christopher Gust

Board of Governors of the Federal Reserve System

Jaime Marquez

Board of Governors of the Federal Reserve System

Date Written: May 2002

Abstract

While information technologies (IT) are credited with the recent acceleration in productivity in the United States, many other industrial countries have not experienced a pickup in productivity growth. To explain this productivity divergence, we use panel data from 1992 to 1999 for 13 industrial countries and find that this divergence is driven in part by differences in both the production and adoption of information technologies. Based on this finding, we proceed to investigate what factors might play a role in explaining differences in IT adoption. Our results support the view that burdensome regulatory environments and in particular regulations affecting labor market practices have impeded the adoption of information technologies and slowed productivity growth in a number of industrial countries. We then develop a theoretical model with vintage capital and labor to evaluate the effect of more stringent labor market regulations on a firm's decision to adopt new technologies. We establish conditions under which a tax on firing workers delays the adoption of IT technology. These conditions occur when technological change is skill-biased and a firm must upgrade the quality of its workforce through labor turnover. The resulting delay in adopting IT technology then has negative implications for economy-wide productivity and is largely consistent with our empirical results.

JEL Classification: C12, C33, D24, L50, O47

Suggested Citation

Gust, Christopher and Marquez, Jaime, International Comparisons of Productivity Growth: The Role of Information Technology and Regulatory Practices (May 2002). Available at SSRN: https://ssrn.com/abstract=314200 or http://dx.doi.org/10.2139/ssrn.314200

Christopher Gust

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jaime Marquez (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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