Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 0562: Technological Breakthroughs and Productivity Growth

Harald Edquist () and Magnus Henrekson ()
Additional contact information
Harald Edquist: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Magnus Henrekson: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: This study consists of an examination of productivity growth following three major technological breakthroughs: the steam power revolution, electrification and the ICT revolution. The distinction between sectors producing and sectors using the new technology is emphasized. A major finding for all breakthroughs is that there is a long lag from the time of the original invention until a substantial increase in the rate of productivity growth can be observed. There is also strong evidence of rapid price decreases for steam engines, electricity, electric motors and ICT products. However, there is no persuasive direct evidence that the steam engine producing industry and electric machinery had particularly high productivity growth rates. For the ICT revolution the highest productivity growth rates are found in the ICT-producing industries. We suggest that one explanation could be that hedonic price indexes are not used for the steam engine and the electric motor. Still, it is likely that the rate of technological development has been much more rapid during the ICT revolution compared to any of the previous breakthroughs.

Keywords: electrification; general purpose technologies; ICT revolution; productivity growth; steam power; Technological breakthroughs

JEL-codes: N10; O10; O14; O40

63 pages, First version: August 24, 2004. Revised: January 23, 2006. Earlier revisions: April 4, 2005, January 23, 2006.

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