Abstract

In order to evaluate the competitiveness of different economic systems or different sectors in the economy, indicators allowing to measure and compare productivity growth rates for different sectors or different economies must be developed. In this paper we present the available empirical evidence about the behavior of productivity growth rates in the last two decades. We show the decrease in the growth rates of the US productivity in the eighties and early nineties in spite of the massive investments in Information and Communication Technologies (ICT), the so called Productivity Paradox. We document the resurgence of productivity growth in the second half of the nineties and the emergence of an increasingly large productivity gap between Europe and the United States as well. We interpret these stylized facts on theoretical grounds by focusing on two classes of possible explanations: the role of the investment and capital deepening in ICT and the methodological issues raised by the definition and measurement of productivity growth. The two issues are at least partly correlated, the measurement of the actual contribution of the ICT to productivity growth being of central importance. Such measurement problem raises a number of conceptual issues - ranging from the appropriate definition of outputs and inputs to the introduction of hedonic functions to adjust for the differences in the quality of goods and services facing fast obsolescence processes - which add to the ones traditionally faced by the vast literature on productivity measures. In the paper, we investigate these issues by showing how they affect the resulting productivity indexes and the significance of intertemporal and cross-country comparisons and we then reinterpret the empirical evidence by taking them into account.