Computers and Economic Growth: Firm-leyel Evidence Computers and Economic Growth: Firm-level Evidence

We would like to thank Michael Sullivan-Trainor and International Data Group for providing essential data. We alone are responsible for any remaining errors in the paper. ABSTRACT In advanced economies, computers are a promising source of output growth. This paper assesses the value added by computer equipment and information systems labor by estimating several production functions that also include ordinary capital, ordinary labor and R&D capital. Our study employs recent firm-level data for 367 large firms which generated approximately $1.8 trillion dollars in output per year for the period 1988 to 1992. We find evidence that computers are correlated with significantly higher output at the firm level, although simultaneity makes it difficult to prove a causal relationship. Considering the rapid growth of computer capital stock, our estimates imply that computers were associated with more output growth in the sample period than all other types of capital combined, despite the fact that they accounted for less than 2% of the total capital stock.

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