Kevin J. Stiroh

Raising the Speed Limit

This paper examines the underpinnings of the successful performance of the US economy in the late 1990s. Relative to the early 1990s, output growth has accelerated by nearly two percentage points. We attribute this to rapid capital accumulation, a surge in hours worked, and faster growth of total factor productivity. The acceleration of productivity growth, driven by information technology, is the most remarkable feature of the US growth resurgence. We consider the implications of these developments for the future growth of the US economy ...

A Retrospective Look at the U.S. Productivity Growth Resurgence

It is now widely recognized that information technology (IT) was critical to the dramatic acceleration of U.S. labor productivity growth in the mid-1990s. This paper traces the evolution of productivity estimates to document how and when this perception emerged. Early studies concluded that IT was relatively unimportant. It was only after the massive IT investment boom of the late 1990s that this investment and underlying productivity increases in the IT-producing sectors were identified as important sources of growth. Although IT has diminished in significance since the dot-com crash of 2000, we project that private sector productivity growth will average around 2.5 percent per year for the next decade, a pace that is only moderately below the average for the 1995-2005 period.

Computers And Growth

The purpose of this paper is to describe the impact of investment in computers on the growth of the U.S. economy. The economic literature on computers is relatively rich in information on the decline in computer prices and the growth of computer investment. Constant quality price indices for computers have been included in the U.S. National Income and Product Accounts (NIPA) since 1986. These indices employ state of the art methodology to capture the rapid evolution of computer technology. While the annual inflation rate for overall investment has been 3.66 percent for the period 1958 to 1992, computer prices have declined by 19.13 percent per year! Similarly, overall investment grew at 3.82 percent, while investment in computers increased at an astounding 44.34 percent! These familiar facts describe growth in the output of computers. The objective of this paper is to complete the picture by analyzing the growth of computer services as inputs. In a pioneering paper Bresnahan (1986) has focused on pecuniar...

How did bank holding companies prosper in the 1990s

Abstract This paper examines the improved performance of US bank holding companies (BHCs) from 1991 to 1997. Analysis of cost and profit functions using several alternative output specifications suggests that the gains were primarily due to productivity growth and changes in scale economies. Various econometric methodologies yield productivity growth of about 0.4% per year and the optimal size seems to have increased in the 1990s era of deregulation, technological change, and financial innovation. Estimates of both productivity growth and economies of scale are robust across traditional and non-traditional output specifications. Despite the overall success, however, substantial cost and profit inefficiency existed for BHCs of all sizes in the 1990s. These efficiency estimates are particularly sensitive to the output specification and failure to account for non-traditional activities like off-balance sheet (OBS) items leads profit efficiency, but not cost efficiency, to be understated for the largest BHCs.

Competitive Dynamics of Deregulation: Evidence from U.S. Banking

This paper examines the impact of increased competition from deregulation on the dynamics of the U.S. banking industry. We find the link between a banks relative performance and its subsequent market share growth strengthens significantly after deregulation as competitive reallocation effects transfer assets to better performers. Exit dynamics also change in ways consistent with the disciplinary role of competition. The net effect is a substantial reallocation of market share toward better banks. We conclude that earlier regulation of U.S. banks blunted this market mechanism and seriously hindered the competitive process.

Growth of US Industries and Investments in Information Technology and Higher Education

This paper presents new data on the sources of growth for the US economy over the period 1977-2000. Our principal innovation is the incorporation of detailed information for individual industries, including those involved in the production of information technology equipment and software. We show that economic growth is dominated by investments in information technology and higher education, both for individual industries and the economy as a whole. We also show that a jump in information technology investment, gains in the employment of college-educated workers, and the revival of productivity growth account for the resurgence of the US economy since 1995.

Explaining a Productive Decade

This paper analyzes the sources of U.S. productivity growth in recent years using both aggregate and industry-level data. We confirm the central role for information technology (IT) in the productivity revival during 1995-2000 and show that IT played a significant, though smaller, role after 2000. Productivity growth after 2000 appears to have been boosted by industry restructuring and cost cutting in response to profit pressures, an unlikely source of future strength. In addition, the incorporation of intangible capital into the growth accounting framework takes some of the luster off the performance of labor productivity since 2000 and makes the gain during 1995-2000 look larger than in the official data. Finally, we examine the outlook for trend growth in labor productivity; our estimate, though subject to much uncertainty, is centered at 2-1/4 percent a year, faster than the lackluster pace that prevailed before 1995 but somewhat slower than the 1995-2006 average.

Projecting Productivity Growth: Lessons from the U.S. Growth Resurgence

This paper analyzes the sources of U.S. labor productivity growth in the post-1995 period and presents projections for both output and labor productivity growth for the next decade. Despite the recent downward revisions to U.S. GDP and software investment, we show that information technology (IT) played a substantial role in the U.S. productivity revival. We then outline a methodology for projecting trend output and productivity growth. Our base-case projection puts the rate of trend productivity growth at 2.21% per year over the next decade with a range of 1.33 - 2.92%, reflecting fundamental uncertainties about the rate of technological progress in IT-production and investment patterns. Our central projection is only slightly below the average growth rate of 2.36% during the 1995-2000 period.

The performance of universal banks: Evidence from Switzerland

This paper examines the production structure of Swiss banks in the period 1996-99. Using a variety of output specifications, we find evidence of large relative inefficiencies across Swiss banks. The results show the importance of accounting for the broad range of activities that universal banks undertake, e.g., failure to account for off-balance sheet items, trading, and brokerage and portfolio management activities leads profit efficiency to be dramatically understated. We find evidence of economies of scale for small and mid-size banks, but little evidence that significant scale economies remain for the very largest banks. Finally, evidence on scope economies is weak for the largest banks that are involved in a wide variety of activities. These results suggest few obvious benefits from the trend toward larger universal banks.

The Impact Of Vintage And Survival On Productivity: Evidence From Cohorts Of U.S. Manufacturing Plants

This paper examines the evolution of productivity in U.S. manufacturing plants from 1963 to 1992. We define a vintage effect as the change in productivity of recent cohorts of new plants relative to earlier cohorts of new plants, and a survival effect as the change in productivity of a particular cohort of surviving plants as it ages. Both factors contribute to industry productivity growth, but play offsetting roles in determining a cohorts relative position in the productivity distribution. Recent cohorts enter with higher productivity than earlier entrants did, whereas surviving cohorts show productivity increases as they age. These two effects roughly offset each other, however, so there is a rough convergence in productivity across cohorts in 1992 and 1987.