The productivity paradox and the business cycle

Abstract

From the early 1980s to the late 1990s overall productivity rates did not reflect the rising investment in information and computer technology (ICT). This paradox, the productivity paradox, which was widely discussed among economists may well turn out to be mainly a mirage once the assumption is excluded that investment has a short‐run effect on productivity. The apparent productivity paradox seems to be rooted in an ICT infrastructure that is inadequate and in an increase in income disparities that thwart the realization of economies of scale.