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While several explanations have been suggested, most economists believed that firms were finally able to harness the information technology revolution to introduce new methods of production, management controls, and services. This view, sometimes called the New Economy Paradigm, argued that a new permanently higher trend rate of productivity growth has occurred. Others cautioned that another explanation may hold or that the effect of information technology might not be permanent.
The recession of 2001 seemed to further confirm the higher trend growth rate. While labor productivity growth did slow in 2001 compared to the previous 5 years, its growth was still rapid when compared to most other recessions...
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