ABSTRACT
Computers have lifted the productive capacity of firms, shifted the demand for skills, and reduced the susceptibility of firms to unwanted swings in inventories. The magnitude and timing of these effects is the subject of intense research. This chapter presents the data on the increased importance of investment in computers in the United States economy. It focuses on the broader economic impact of computers. Growth in labour productivity clearly accelerated in the latter half of the 1990s, with the acceleration nearly evenly spread across the contributions of capital per hour and multifactor productivity, and a big jump in the contribution of computer and software capital. It is difficult to separate the permanent or 'trend' component of the fluctuations in labour productivity from the temporary fluctuations. Investment adjustment costs have long played a key role in explaining investment behaviour, and this key role is true in explaining computer investment.
