The Swedish Ict Miracle: Myth or Reality? the Swedish Ict Miracle – Myth or Reality?

This paper investigates the relative labor productivity level for total manufacturing in Germany, Sweden and the US for the period 1980–2001. The paper also presents estimates of labor productivity levels for 18 different manufacturing industries for the period 1993–2000. The results show that the Swedish manufacturing productivity caught up with German and US productivity in the 1990s, overtaking the German level in 1995 and coming very close to the US level by the end of the 1990s. It has been argued that much of the Swedish surge in labor productivity during the second half of the 1990s was due to the spectacular growth of the Radio, television and communication equipment (RTC) (ISIC 32) industry. However, this paper shows that since 1998 Swedish RTC productivity has been declining relative to the corresponding industry in Germany and the US. Moreover, it is shown that the productivity growth of the ICT-producing industries is very sensitive to the value added price deflators that are used to calculate real value added growth rates. Unlike Sweden, the US uses hedonic price indexes for semiconductors and microprocessors. Therefore estimates based on the US intermediate input price deflators for semiconductors and microprocessors suggest that the productivity growth of the Swedish RTC industry during the 1990s is partly a statistical artefact. This implies that the productivity growth of total manufacturing also has been overestimated. * I am especially grateful to Robert Inklaar, without whose help this paper never would have been written. I would also like to thank Bart van Ark, Edwin Stuivenwold, Marcel Timmer and Gerard Ypma at the Groningen Growth and Development Centre and Magnus Henrekson at the Stockholm School of Economics for providing valuable comments and data for this paper. Moreover, I am grateful to Göran Svensson, Bertil Klang and Per Ericson at Statistics Sweden and Arvid Wallgren and other participants at the seminar at the Swedish Central Bank for insightful comments. Financial support from the Jan Wallander and Tom Hedelius Foundation and the Carl Silvén Foundation is also gratefully acknowledged. ‡ Section for Historical Economics and Entrepreneurship, Department of Economics, Stockholm School of Economics, PO Box 6501, SE-113 83 Stockholm, Sweden. Phone: +46 8 736 92 59, Fax: +46 8 31 32 07, E-mail: [email protected]