Journal Article

Has the surge in computer spending fundamentally changed the economy?

Abstract: The computer sector has been one of the fastest growing segments of the U.S. economy over the past two decades. The dynamic nature of the computer sector and the sector's increased prominence in overall spending in the economy have led some analysts to suggest that the economy is entering a New Era, where the economy will return to the high-growth, low-inflation conditions of the 1950s and 1960s.> Although spending on computers is spread throughout all sectors of the economy, the key channel through which the economy might be transformed is investment spending on computers by businesses. Spending on computers by businesses is key because the contribution of computers to output growth depends crucially on the quantity of computers used in the production process. If rapid spending on computers does lead to faster output growth, then understanding the magnitude of the contribution of computer capital to output growth will be crucial for long-run forecasting and policy analysis.> Haimowitz examines whether computers have fundamentally changed the economy. He finds that computers have had only a modest impact on output growth until now, but the future impact could be larger.

Keywords: economic conditions - United States; Computers;

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Review

Publication Date: 1998

Volume: 83

Issue: Q II

Pages: 27-42