Author Question: Briefly discuss the correlation between IT investment and U.S. productivity ... (Read 53 times)

moongchi · **on:** Jun 24, 2018

Briefly discuss the correlation between IT investment and U.S. productivity growth.

Question 2

Discuss how the average annual percent change in nonfarm productivity has varied over the past 65 years.

kiamars2010 · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

The relationship between investment in information technology and U.S. productivity growth is more complex than it seems. One possible explanation for this complexity is that there is a lag time between the application of innovative IT solutions and the capture of significant productivity gains. For example, researchers examined data from 527 large U.S. firms from 1987 to 1994 and found that it can take five to seven years for IT investment to result in a significant increase in productivity.

Another explanation for the complex relationship between IT investment and U.S. productivity growth lies in the fact that many other factors influence worker productivity rates besides ITthe overall economic climate (expansion/contraction); the flexibility of the labor market; the actions taken by private industry, various government entities, and the financial sector; and changes in supply and demand

Answer to Question 2

The increase in nonfarm productivity averaged 2.8 percent per year from 1947 to 1973 as modern management techniques and automated technology made workers far more productive. Productivity dropped off in the mid-1970s, but rose again in the early years of the twenty-first century, only to drop dramatically from 2007 to 2012, a period of time corresponding to the deepest recession in the United States since the Great Depression.