Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 665: Technological Breakthroughs and Productivity Growth

Magnus Henrekson () and Harald Edquist ()
Additional contact information
Magnus Henrekson: Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Harald Edquist: SNS, Postal: P.O. Box 5629 SE-114 86 Stockholm

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

JEL-codes: N10; O10; O14; O40

55 pages, May 3, 2006

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