Puerto Rico Economic Pulse ©

September 2002: How Can the US Economy Recover?

An analysis of US business fixed investment during the 1990’s

For the US economy, the booming 1990`s have gone and the ensuing short recession is now almost over. On the whole, analysts are persuaded that there is a strong causal link between business investment on information technology and labor productivity. The thinking is that cheaper computer capital replaced more relatively expensive non-computer capital to the extent that the production process allowed. Is that so? Have computers been the whole story of the 90`s investment expansion? And to what extent has business investment activity been quantitatively and qualitatively different from past cycles? Will investment drive the US recovery? Let`s examine these questions.