New technologies and productivity

We look at the impact of technology on productivity by focusing on the role of ICT and at Solow's paradox that computers appeared everywhere except the productivity statistics.

The US "productivity miracle" after 1995 was led by the contribution of ICT to capital deepening and total factor productivity growth but this acceleration was not experienced by the economies of the EU despite similar investment. Why? We found the answer lay in the intensity with which ICT is applied to those company operations which would benefit, such as wholesale retail and financial service sectors.

Management practices and non-hierarchical organisational form were found to be crucial enablers of the way technology was put to most productive use: decentralisation of decision making overcomes the uncertainty associated with the implementation of new technology by allowing local level experiment with the best methods for applying it. Our case study of the introduction of a banking technology also illustrates the long time-lag before innovations feed through into productivity. The role of competition from trade also encourages increased investment in ICT and reallocation of employment towards more innovative and technologically advanced firms.

We also explore the human effects of technology introduction. The rapid diffusion of ICT in the 1990s involved a polarisation of employment with the middle of the skill distribution falling relative to the top and bottom. Industries with faster growth of ICT had greater increases in relative demand for highly-educated workers and bigger falls in relative demand for middle-educated workers. The changes in inequality and employment brought about by increasing use of robotics and artificial and machine learning technologies will become a focus of the centre's work.