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Report| McKinsey Global Institute

US productivity growth, 1995–2000

October 2001 | byBill Lewis, Angelique Augereau, Mike Cho, Brad Johnson, Brent Neiman, Gabriela Olazabal, Matt Sandler, Sandra Schrauf, Kevin Stange, Andrew Tilton, Eric Xin, Baudouin Regout, Allen Webb, Mike Nevens, Lenny Mendonca, Vincent Palmade, Greg Hughes, James Manyika

This study reveals the sources of the US productivity miracle in the late 90's and the economy's future prospects. Much of the US productivity acceleration was structural in nature, and should endure.

Retail sector

In general merchandise (representing 16 percent of the total retail productivity growth acceleration), we found that Wal-Mart directly and indirectly caused the bulk of the productivity acceleration through ongoing managerial innovation that increased competitive intensity and drove the diffusion of best practice (both managerial and technological).

Wholesale sector

Wholesale trade is the sector that contributed most to the acceleration of productivity growth in the US after 1995. Focusing on pharmaceuticals wholesaling, we found that half of the acceleration was driven by warehouse automation and improvements in the organization. The other half was due to an increase in the value of intermediation roles and the increase in value of drugs.

Semiconductor sector

Productivity growth in the semiconductor sector was caused by a surge in competitive intensity, technological improvements in complementary industries, and an increase in demand.

Computer manufacturing sector

The computer manufacturing sector contributed a disproportionate amount to America's growth in productivity compared to other sectors. Increased demand and the improved capabilities of computers were important causes.

Telecommunication services sector

The telecommunications services sector illustrates how technological and regulatory change can stimulate productivity growth. Technological change has encouraged telecommunications firms to invest in newer, higher-performance equipment to build network capacity and add services.

Securities sector

The securities sector’s strong productivity performance was due to the combination of buoyant financial markets, exploitation of IT (information technology), and procompetition regulations.

Retail banking sector

From 1995 to 1999, retail banking presented a paradox. Despite a substantial acceleration in IT investments, labor productivity growth rates continued to decrease.

Hotel sector

In an effort to enhance revenue through increased occupancy and customer loyalty, hotels invested heavily in property management, central reservation systems, and related applications (CRM and revenue management). Hotels, however, did not see improvements in productivity over 1995 levels.

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About this research

This report draws on applied research carried out by McKinsey consultants. To learn more about our expertise please visit Mckinsey Global Institute, High Tech Practice. Mckinsey Global Institute,