Return of the Solow Paradox? IT, Productivity, and Employment in U.S. Manufacturing

An increasingly influential “technological-discontinuity” paradigm suggests that IT-induced technological changes are rapidly raising productivity while making workers redundant. This paper explores the evidence for this view in the U.S. manufacturing sector. In contrast to this view and our expectations, we find little differential productivity growth in IT-intensive manufacturing industries. In fact, gross output does not even appear to grow faster in such industries than in the rest of manufacturing. Though there is some relative decline in employment in these industries in the 1990s, this is preceded by more rapid growth in the 1980s and is followed by more rapid growth in the 2000s. Overall, there is little support for this popular technologicaldiscontinuity view within U.S. manufacturing.