Information Technology Adds $2 Trillion to U.S. Economy, New Study Finds

Information technology is responsible for nearly all of pickup in economic growth over the lastdecade, adding $2 trillion annual to the economy, according to a new report released by the Information Technology & Innovation Foundation (ITIF). The report, titled Digital Prosperity: Understanding the Economic Benefits of the Information Technology Revolution, finds that the economic transformation resulting from IT was occurring at adoption rates exceeding even the most optimistic forecasts of the late 1990s.

The integration of IT into virtually all aspects of the economy and society is creating a digitally enabled economy that is responsible for generating the lion's share of economic growth and prosperity, here and abroad, including indeveloping nations.

"For the United States alone, what we found was that because of thedigital revolution, GDP is $2 trillion larger today than it would have been had growth in the post-1995 era proceeded at the 1974 to 1995 rate," says Robert Atkinson, president of the Information Technology &Innovation Foundation. "We need to recognize this phenomenon and adjust our thinking to make IT a centerpiece of our economic policy -- from planning and forecasting to tax policies that incent future growth."

Key highlights from the report include:

• While productivity impacts from IT are among the highest in the United States, most other nations have benefited from the IT revolution as well, including Australia, Canada, Finland, France, Germany, Korea, Japan, the Netherlands, and Switzerland. Moreover, while its impact is not as large in most developing nations, IT is making a difference, in part because IT expenditures rose twice as fast in developing nations from 1993 to 2001 compared to the Organization for Economic Co-operation and Development (OECD) average. For example, IT usage in China was responsible for 38 percent of the increase in total factor productivity growth and 21 percent of GDP growth.


• While the emerging digital economy has produced enormous benefits, there is still significant potential growth to be derived from leveraging IT. Policymakers in developed and developing nations must work to ensure that future policies and programs they put in place spur digital transformation so that all their citizens can fully benefit.

"First and foremost, policies to support digital transformation need to become the fourth leg of economic policy alongside fiscal, monetary and investment policy," says Atkinson. "In particular, this means that policymakers must adopt an approach that incorporates IT transformation in all that they do. Accelerating digital transformation is likely to be the most important step policy makers can take to ensure robust economic growth in the future."

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