The Swedish ICT miracle - myth or reality?

This article investigates the productivity development in Sweden in the 1990s. The results show that much of the recorded Swedish surge in labor productivity was due to the spectacular growth of the Radio, television and communication equipment (RTC) industry. However, this article shows that the productivity growth of the RTC industry is very sensitive to value added price deflators. Unlike Sweden, the US uses hedonic price indexes for semiconductors and microprocessors which are important intermediate inputs in the RTC industry. Estimates based on the US intermediate input price deflators for semiconductors and microprocessors suggest that the productivity growth of the Swedish RTC industry during the 1990s is an artefact. This implies that the productivity growth of total manufacturing has also been overestimated. The results for Sweden are also interesting for other countries such as Finland, Ireland and South Korea where ICT producing industries have contributed substantially to labor productivity growth.