Will the New Economy Emerge as Information Technology Pays Off?

Abstract

During the past 30 years, the U.S. economy, along with the economies of other industrialized countries, has experienced several noticeable trends: an economic slowdown, a tremendous increase in the amount of information technology investment, and a increasing flow of workers from production to information sectors. With slow economic growth and fast IT capital accumulation, the so-called "information technology productivity paradox" has become a prevailing concept in the literature. Many researchers have attempted to solve the paradox by firm-level analysis. Indeed, a macroeconomic analysis, using a nation as an analysis unit, is not common in MIS research. By considering the complex triangular relationships of the above economic trends, this paper applies econometric models and macroeconomic theories to try to solve the IT productivity paradox. Emphasis is placed on the impact of information technology impact on the flow of workers from the production to the information sector and on the effect of such a flow on productivity. The paper demonstrates that the flow could unravel the IT productivity paradox and provide a prediction of future economic growth.

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