Recent Productivity Increases Due in Part to Decline in IT Prices

On February 3, 2005, the Congressional Research Service updated "Productivity: Will the Faster Growth Rate Continue?"

The Report attributes the recent pickup in productivity in part to the rapid rate of decline in the prices of computers and other IT equipment. An important factor in those price declines has been innovation in the manufacture of microprocessors. As computer prices have fallen, their use has become much more widespread. Because of falling prices it has become profitable to put computers to uses with smaller and smaller returns. There is also the prospect that it may take firms a considerable amount of time to adapt the way they do business to take advantage of their investments in IT equipment. As was the case with other historic technological advances, the productivity gains attributable to investments in IT equipment may ripple through the economy for some time.

18 pgs
Document No: RL32456

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