Ronald E. McNair Program


LaToya Green
   SCHOOL:  The University of Mississippi
  MAJOR:  Management Information Systems
  MENTOR: Dr. Brian Reithel
  EXPECTED GRADUATION DATE:  May 2002
  ORGANIZATIONS & HONORS: 
  • IMAGE Scholar
  • Delta Sigma Theta Sorority, Inc.
  • Special Olympics Volunteer
  email:  lgreen@olemiss.edu

 
 


 

ABSTRACT
 

Productivity Paradox:
Errors In Measurement and its Role in the Paradox


Information technology (IT) use in business has greatly increased over the past few decades.  Companies have spent billions of dollars on computer systems.  Despite the increase in IT investment, firms have had a shortfall in productivity growth. The average growth of productivity has dropped from 3.25% per year, over the years 1961-1973 to 1.09% per year over the years 1974-1992 for 18 countries.  This increase in IT investment with a slowing rate of economic growth is known as the Productivity Paradox.  Researchers have developed four basic reasons for the decline: 
  • lags in education and training
  • mismanagement of IT
  • redistribution and dissipation of profits
  • errors in measurement  
 Errors in measurement are believed to be the primary cause of the shortfall of productivity growth.  Possible errors are errors in measurement of output, errors in measurement of input, measurement of new products, and lack of adjustment due to inflation.   In this paper, the possible errors were evaluated, and evidence was presented to show that mismeasurement does cause several problems when interpreting the productivity growth rate.