IS THERE A PRODUCTIVITY PARADOX AT THE REGIONAL LEVEL? AN EMPIRICAL STUDY OF THE GROWTH CONTRIBUTION OF IT CAPITAL STOCK AT THE STATE-LEVEL IN THE UNITED STATES BETWEEN 1977 AND 1997

This study analyzes information technology embodied in the stock of capital. A panel dataset is constructed for the 50 states plus the District of Columbia, covering 52 industry categories from 1977 through 1997. The data come from the US Bureau of Economic Analysis. This dataset is separately analyzed for both industries and states. Using production function regressions and growth accounting techniques, the productive capacity and growth contribution of the IT capital stock is estimated at the state level. The results indicate a positive contribution to state productivity growth that amounts to 10% of the observed growth. Furthermore, decreasing returns to capital accumulation are found to apply to information technology capital, since its growth contribution is lower in states that own the highest shares of IT capital.