THE IT REVOLUTION ACROSS THE UNITED STATES

Abstract

In this paper we study the geography of the IT revolution in the U.S. economy. By relating the intensity of IT production and diffusion to labor productivity growth for the United States, we find three main results. First, states with above‐average production intensity of IT manufacturing show more growth acceleration than other states. Second, the same applies to states with above‐average IT diffusion. Yet, while the result for IT‐producing states is strong, the result for IT‐using states is somewhat smaller and less robust across specifications. Third, we also reconcile our state‐wide pieces of evidence with previous industry and aggregate evidence. Accelerating productivity growth in IT‐producing states stems from both IT‐producing and IT‐using industries in those states and is not a manifestation of the exclusive importance of IT production. Moreover, the less robust evidence for IT‐using states is due to lower growth contributions from IT‐producing and other industries in these states, not a symptom of a missing effect of IT usage.