What drives productivity growth?

Economists have long debated the best way to explain the sources of productivity growth. Neoclassical theory and "new growth" theory both regard investment—broadly defined to include purchases of tangible assets, human capital expenditures, and research and development efforts—as a critical source of productivity growth, but they differ in fundamental ways. Most notably, the neoclassical framework focuses on diminishing and internal returns to aggregate capital, while new growth models emphasize constant returns to capital that may yield external benefits. This article finds that despite their differences, both theories help explain productivity growth. The methodological tools of the neoclassical economists allow one to measure the rate of technical change, and the models of the new growth theorists provide an internal explanation for technical progress.Economic development ; Productivity ; Capital ; Technology

The Performance of Universal Banks: Evidence from Switzerland

This paper examines the production structure of Swiss banks in the period 1996-99. Using a variety of output specifications, we find evidence of large relative inefficiencies across Swiss banks. The results show the importance of accounting for the broad range of activities that universal banks undertake, e.g., failure to account for off-balance sheet items, trading, and brokerage and portfolio management activities leads profit efficiency to be dramatically understated. We find evidence of economies of scale for small and mid-size banks, but little evidence that significant scale economies remain for the very largest banks. Finally, evidence on scope economies is weak for the largest banks that are involved in a wide variety of activities. These results suggest few obvious benefits from the trend toward larger universal banks.

Explaining the rising concentration of banking assets in the 1990s

In recent years, the nation's largest bank holding companies have sharply increased their market share of assets. Have these institutions achieved their dominance by expanding their existing subsidiaries or by merging with other bank holding companies? A study of industry data for 1990-99 suggests that the increased market share of the largest companies is attributable almost entirely to external growth through mergers and acquisitions.Bank assets ; Bank holding companies ; Bank mergers

Taking the pulse of the tech sector: a coincident index of high-tech activity

A new index of the U.S. high-tech sector, drawing upon a range of technology-specific data, has the potential to offer a more timely assessment of economic activity than has been possible to date. The index suggests that while the tech sector has rebounded from its poor performance in the 2000-01 "tech bust," it has not resumed its rapid expansion of the late 1990s.High technology industries ; Technology ; Economic indicators ; Index numbers (Economics)

Will the U.S. productivity resurgence continue?

U.S. productivity growth has accelerated in recent years, despite a series of negative economic shocks. An analysis of the sources of this growth over the 1995-2003 period suggests that the production and use of information technology account for a large share of the gains. The authors project that during the next decade, private sector productivity growth will continue at a rate of 2.6 percent per year, a significant increase from their 2002 projection of 2.2 percent growth.Productivity ; Information technology

Projecting productivity growth: lessons from the U.S. growth resurgence

Following the 1995-2000 period of more rapid output growth and lower inflation in the United States, economists have strenuously debated whether improvements in economic performance can be sustained. The recession that began in March 2001 intensified the debate, and the economic impacts of the events of September 11 have yet to be fully understood. Both factors add to the considerable uncertainties about future growth that currently face decision makers in both the public and private sectors. ; In this article, the authors analyze the sources of U.S. labor productivity growth in the post-1995 period and present projections for both output and labor productivity growth for the next decade. Despite the 2001 downward revisions to U.S. gross domestic product and software investment, the authors show that information technology (IT) played a substantial role in the U.S. productivity revival. The article then outlines a methodology for projecting trend output and productivity growth. The base-case projection puts the rate of trend productivity growth at 2.21 percent per year over the next decade with a range of 1.33 to 2.92 percent, reflecting fundamental uncertainties about the rate of technological progress in IT-production and investment patterns. The central projection is only slightly below the average growth rate of 2.36 percent during the 1995-2000 period.Productivity ; Technology ; Economic development