ACKNOWLEDGMENTS

The authors would like to express their appreciation to the many people who
contributed substantially to the production of this report. These include at
the Department of Commerce: Elliot Maxwell, Special Advisor to the Secretary
for E-Commerce; Carol A. Meares, Technology Administration; Barbara Fraumeni,
Ralph Kozlow, Christopher Bach, Michael Mann, John Rutter, Mai-Chi Hoang, Obie
Whichard and Ray Mataloni, Bureau of Economic Analysis; Thomas Mesenbourg,
Harvey Monk, Donna Wade and Minh Nguyen, Bureau of the Census; Carl Cox, John
Tschetter and George McKittrick, Office of Chief Economist, Economics and
Statistics Administration; Roger Pomeroy and Marjorie Pavliscak, International
Trade Administration; and James McConnaughey, National Telecommunications and
Information Administration. The authors would also like to thank Daniel Hecker
and James Franklin, Bureau of Labor Statistics, U.S. Department of Labor; Scott
Ki, International Trade Commission; Raymond Wolfe and John Jankowski, National
Science Foundation; and Daniel E. Sichel and Stephen D. Oliner, Board of
Governors of the Federal Reserve System.

(1)  If productivity growth had remained at 1.4 percent for the last four years,
nonfarm output would have been $300 billion lower in 1999, the equivalent of
about $1,100 in lost output for every person in the country.

(2) Doubling every 18 months is closely equivalent to increasing by a factor of 
10 every 5 years and by a factor of 100 every 10 years. This phenomenon is know 
as "Moore's Law" and was first noted by Gordon Moore, co-founder of Intel, in
1965. Intel. "What is Moore's Law" Intel Museum Home Page. 
(http://intel.com/intel/museum/ 25anniv/hof/moore.htm)

(3) Jon William Toigo, "Avoiding a Data Crunch." Scientific American. May 2000.
(http://www.scientificamerican.com/ 2000/0500issue/0500toig.html)

(4) David Clark, senior research scientist at MIT's Laboratory for Computer
Science, cited in Jeff Hecht, "Wavelength Division Multiplexing." MIT's
Technology Review. March/April 1999. (http://www.techreview.com/articles/ma99/hecht.htm)

(5) Skeptics argue that software upgrades do not represent increases in
performance, but only the addition of bells and whistles that offset
improvements in processing speed. However, that view ignores the directions
taken in the business uses of their software investments. Businesses are
deploying software to combine cheaper computer power with more reliable
communications to create extraordinary efficiencies and improve decision making
within their own operations and supply networks. For example, over a three-year
period, Wal-Mart achieved a 47 percent increase in sales on only a 7 percent
increase in inventories by using a relational database system running on
massively parallel computers. The system allows vendors to access almost
realtime information on sales and customer transactions and handles 120,000
queries each week from 7,000 suppliers. Businesses are also investing in
software to integrate information and reduce staffing in other activities, such
as production operations, human resource management, payroll, and sales force
activities. "High-tech Complements Human Touch." Discount Store News. October
1999.

(6) The number of possible connections is technically n(n-1). This contrast
between the change in cost and value of a network as it grows is sometimes
labeled "Metcalfe's Law." Shapiro, Carl and Varian, Hal. Information Rules: A
Strategic Guide to the Network Economy, Boston: Harvard Business School Press.
1998. p. 184.

(7)  Robert X. Cringely, Accidental Empires, New York: Harper Business. 1992. P.
83.

(8)  This chapter was written by Patricia Buckley, Senior Policy Advisor, and
Sabrina Montes, Economist, in the Office of Policy Development.

(9) Specific estimates from private sources and company-specific examples are
included in this report to be illustrative of developing trends and their
inclusion does not signify Department of Commerce validation or approval.
Disparities among private estimates can result from differences in definitions,
methods, data, model and sampling error, and product coverage. Variations also
reflect the research needs of customers. While data used for estimates and
forecasts are based on a combination of surveys and interviews, the survey
questions and answers are not made public, sample sizes vary considerably
across surveys, and little information is available on the respondents.

(10)  Inktomi, "Inktomi WebMap," Press Release, January 2000
(http:/www.inktomi.com/webmap). Although over one billion unique pages exist,
it should be noted that even the most sophisticated search engines cover only a
relatively small proportion of the total number of existing Web sites.

(11) David Peterschmidt, President of Inktomi, quoted by Yahoo, "Internet
Volume is Doubling Every 90 Days," October 3, 1997 (http://www.nua.ie).

(12) This analysis follows the draft definition of electronic commerce developed 
by the U.S. Bureau of the Census. According to this definition, electronic
commerce is a specific type of e-business processes--one that involves a
transaction, the transfer of ownership. See Thomas L. Mesenbourg, "Measuring
Electronic Business: Definitions, Underlying Concepts, and Measurement Plans,"
U.S. Bureau of the Census, 1999 (http://www.census.gov/epcd/ www/ebusines.htm).

(13) The Census retail e-commerce estimate was obtained by surveying goods
retailers. The survey panel included not only the traditional bricks and mortar
retailers, but also Internet "pure plays," online versions of traditional
retailers, and manufacturers that have set up a retail establishments (real or
virtual) to sell directly to the public. The Census retail e-commerce estimate
does not include business-to-consumer sales of services, such as travel,
entertainment, or stock transactions. Ongoing Census surveys will provide
information on 1998 and 1999 transactions in other areas of the
business-to-consumer e-commerce market space (including services and food
service and accommodations businesses).

(14) Forrester Research, Forrester Findings
(http://www.forrester.com/ER/Press/0,1772,0,FF.html).

(15) See for example, Jupiter Communications, "Online Holiday Sales Hit $7
Billion, Consumer Satisfaction Rising," Press Release, January 13, 2000
(http://www.jup.com) and PC Data Online, "Web Retailers Score High In Customer
Satisfaction Study," Press Release, January 11, 2000
(http://www.pcdataonline.com).

(16)  Jonathan Weber, "The Last Mile," The Industry Standard, March 27, 2000
(www.thestandard.com).

(17) Erik Brynjolfsson and Michael D. Smith, "Frictionless Commerce? A
Comparison of Internet and Conventional Retailers," Management Science, April
2000 (http://ecommerce.mit.edu/papers/friction).

(18) Karen Clay, Ramayya Krishnan, Eric Wolff, and Danny Fernandes, "Retail
Strategies on the Web: Price and Non-price Competition in the Online Book
Industry," Working Paper, December 1, 1999. Differentiating factors include
site brand name awareness, ease of navigation while on the site, and a
reputation for reliability.
(http://dnet.heinz.cmu.edu/dcsrg/books/papers/paper1.pdf). In addition, a
recent Activmedia Research report found that competing on price alone is not
enough for an e-commerce site to sustain competitive advantage. See Nua
Internet Surveys, "Activmedia: Competitive Advantage is Not About Price," March
2, 2000 (http://www.nua.ie). Another survey, this one by Cyber Dialogue, found
that price was a decisive factor in online purchases. See Nua Internet Surveys,
"Cyber Dialogue: Price Still Drives Choice of Shopping Site," March 1, 2000
(http://www.nua.ie).

(19) J.D. Powers and Associates, "More Than Five Million New-Vehicle Shoppers
Nationwide Use the Internet to Shop for New Vehicles," Press Release, August
23, 1999 (http://www.jdpower.com).

(20) Janlori Goldman, Zoe Hudson, and Richard Smith, "Privacy: Report on the
Privacy Policies and Practices of Health Web Sites," sponsored by California
HealthCare Foundation, January 2000. Executive Summary, pp. 4-5
(http://ehealth.chcf.org).

(21) Jupiter Communications, "Internet Health Commerce to Soar to $10 Billion,
But Current Offerings Don't Deliver on Consumer Convenience," Press Release,
January 26, 2000 (http://www.jup.com).

(22) Recruitsoft.com and iLogos Research, Global 500 Web Site Recruiting 2000
Survey, An Internet Intelligence Report
(http://www.recruitsoft.com/iLogosSurvey/doc.html). The Global 500 is a list of
the largest companies in the world, by gross revenue, according to Fortune
Magazine.


(23) Forrester Research, "Forrester Predicts Career Networks Will Capture
Majority of Online Recruitment Market in 2005," Press Release, February 14,
2000 (http://www.forrester.com).

(24) Glenn R. Simpson, "The Web's Final Frontier: City Hall--Two Internet
Start-Ups Find Bureaucrats a Harder Sell Than Venture Capitalists," The Wall
Street Journal, May 17, 2000, p. B1.

(25) Emily Wax, "Immigrants Use Internet As a Link With Past," The Washington
Post, February 3, 2000.

(26) Although The Census Bureau has developed a measurement program to capture
B2B e-commerce and the broader category of activities generally termed
e-business processes, no government estimates are currently available. For a
discussion of the surveys currently scheduled see
http://www.census.gov/epcd/www/ebusines.htm.

(27) Stacy Lawrence, "Behind the Numbers: The Mystery of B2B Forecasts
Revealed," The Industry Standard, February 21, 2000
(http://www.thestandard.com).

(28) National Association of Manufacturers, "New NAM Poll Shows that Despite 
Tech Advances, Most Manufactures Still Not Using E-commerce." Press Release.
February 22, 2000 (http://www.nam.org/News/Releases/Feb00/ pr0222.htm).

(29) Mark A. Brunelli, "What Buyers Want From Web Sites," Purchasing Online,
Special Internet Report, December 16, 1999
(http://www.manufacturing.net/magazine/purchasing).

(30) "Seller Beware," The Economist, March 4, 2000, p. 61-2.

(31) General Motors Corporation, Ford Motor Company, and DaimlerChrysler, "Ford,
General Motors and DaimlerChrysler Create World's Largest Internet-Based
Virtual Market Place," Press Releases, February 25, 2000.

(32) Keith Bradsher, "Carmakers to Buy Parts on Internet," The New York Times,
February 25, 2000, p.1.

(33) Oracle, "Sears, Carrefour, Oracle to Form Retail's First Worldwide Online
Marketplace," Press Release, February 28, 2000
(http://www.globalnetxchange.com).

(34) Sandra Guy, "Sears, French Giant in Online Venture," Chicago Sun-Times.
February 29, 2000.

(35) Boeing, "Boeing, Lockheed Martin, BAE Systems and Raytheon to Create B2B
Exchange for the Aerospace and Defense Industry," Press Release, March 28, 2000
(http://www.boeing.com).

(36) National Association of Manufacturers, "New NAM Poll Shows that Despite 
Tech Advances, Most Manufactures Still Not Using E-commerce," Press Release,
February 22, 2000 (http://www.nam.org/News/Releases/Feb00/ pr0222.htm).

(37) Boston Consulting Group, "New BCG Study Re-Evaluates Size, Growth and
Importance of Business-to-Business E-Commerce," Press Release, December 21,
1999 (http://www.bcg.com/media_center/media_press_release_ archive2.asp).

(38) Clinton Wilder, "Unload your Surplus on the Web," Informationweek, August 
30, 1999.

(39) Ibid.

(40) Pat Reynolds, "Corrugated Comes Over the Internet," Packaging World
Interactive. April 2000.

(41) BOC Gases, "Electronic Commerce as BOC Gases in the United States," Web 
site viewed February 23, 2000 (http://www.boc.com/ecom/success.html).

(42) John Deere, "Deere Announces Internet-Based Customer Support Program,"
News Release, December 9, 1999 (http://www.deere.com).

(43) David Kleinbard, "Web Puts a Charge into Electronics," InformationWeek,
September 27, 1999.

(44) "Shaw Industries Optimizes Employee Compensation and Retention using
Hyperion's Analytic Application Software," Business Wire, Feb 23, 2000.

(45) "Symbol Partners With BPA Systems To Provide Cablevision With Wireless ERP
Warehouse Solution," Business Wire, February 23, 2000.

(46) Richard W. Oliver, "Killer Keiretsu," Management Review, September 1999,
p.11.

(47) Ford Motor Company Web site, Viewed on May 9, 2000 (http://www.ford.com).

(48) Edward Cone, "Building a Stronger Economy," Zdnet, January 24, 2000
(http://www.zdnet.com/intweek/stories/ news/0,4164,2425874-1,00.html).

(49) Forrester Research, "Spectacular Growth for Digital Delivery," February 7,
2000 reported by Nua Internet Surveys, (http://www.nua.ie). The ability to
download material raises concerns about intellectual property protection. For
example, Napster, creator of a software program that allows users to swap music
stored in the MP3 format, is facing multiple lawsuits, charging that it
facilitates the pirating of digitized music.

(50) See (http://www.havi.org).

(51) Emily Thornton, "Digital Wheels", BusinessWeek Online (International
Edition), April 10, 2000 (http://www.businessweek.com/2000/00_15/b3676012.htm).
For example, Toyota equips some high-end models with its Monet system that
offers a online navigational system as well as audio e-mail, weather, news, and
real-time video pictures of traffic at major intersections.

(52) This chapter was written by David Henry, Senior Industry Analyst, and
Donald Dalton, Economist, in the Office of Business and Industrial Analysis.
See the Appendix for data sources and the methodologies underlying the
findings.

(53) Estimates of GPO in this analysis are derived from BEA measures prior to
the October 1999 benchmark revisions, but include the conceptual change made at
that time in the treatment of prepackaged software and software services in the
National Income and Product Accounts. Prior to this change, software purchases
were treated as an intermediate input with no lasting effect. Such purchases
are now classified as fixed investments for both business and government
sectors.

(54) IT-producing industries' share of the economy is calculated from its Gross
Product Originating (GPO) as a percent of the economy, as measured by Gross
Domestic Income (GDI). Theoretically, the nominal dollar value of GDI, the
income associated with the output of all industries, should equal that of Gross
Domestic Product (GDP); i.e., final demand or the market value of the goods and
services produced by labor and property in the United States. In practice,
growth in GDI and GDP have differed by half a percent in recent years.

(55) Estimate of percent of output based on industry spending estimates in the
The Economics of Y2K and the Impact on the United States, Economics and
Statistics Administration, U.S. Department of Commerce, November 17, 1999.

(56) These estimates are based on inflation adjusted "income side" data; i.e.,
income attributable to IT industries compared to growth in Gross Domestic
Income (GDI). Income side data were used here because "product side" data--the
data used to estimate GDP--are not sufficiently disaggregated to describe the
economic performance of all IT-producing industries. However, for a large
segment of IT output--i.e., computers, software, and
telecommunications--product side data can be used to test the robustness of
income side estimates. In fact, for this segment of output, estimates of IT
industries' contribution to economic growth based on product side data coincide
quite closely with growth estimates based on income side data. Since 1995,
based on product-side data, computers and software and communications services
have contributed about 23 percent to economic growth; the comparable estimate
using income-side data is about 22 percent.

(57) Prior to the inclusion of software as an investment good, industry
spending on IT equipment consistently accounted for about one-third of all
capital equipment spending in the 1990s.

(58) Over the 20 year period since 1980, spending on IT equipment has grown at
a steady annual rate of 10-11 percent. In contrast, growth in spending in other
categories of capital equipment, including industrial equipment, averaged about
5-6 percent over the same period. Spending for transportation equipment grew by
an average 5 percent per year in the 1980s, but accelerated to 11 percent in
the 1990s.

(59) Total R&D spending includes industry, federal government, universities and
nonprofit institutions.

(60) R&D data are available for most, but not all, of the IT-producing
industries identified in Table 3.1. Analysis in this section is based on data
for the following 3-digit SIC categories: computers and office equipment,
communications equipment, electronic components, communications services, and
computer services and software.

(61) See the Appendix for the National Science Foundation data on R&D spending.

(62) This chapter was written by Gurmukh Gill, Director of the Office of
Business and Industrial Analysis (OBIA), Jesus Dumagan, Economist, OBIA and
Susan LaPorte, Economist, OBIA.

(63) "Capital deepening" occurs when the amount of capital rises relative to
the amount of labor hours.

(64) The rates of capital deepening in Figure 4.2 are obtained for each period
by subtracting the labor hours growth rate from the growth rates of each type
of capital, where the labor hours growth rate is equal to the growth rate of
output minus the growth rate of labor productivity. All growth rates used in
the figure can be obtained from Stephen D. Oliner and Daniel E. Sichel, "The
Resurgence of Growth in the Late 1990s: Is Information Technology the Story?,"
Washington, DC: Federal Reserve Board, May 2000, Tables 1 and 2, pp. 24-25.

(65) Computing speed has been doubling every 18 months. This phenomenon is
commonly called "Moore's Law." A number that doubles every 18 months grows
exponentially 46.2 percent per year. Thus, by Moore's Law, computer speed
increases roughly ten-fold every 5 years.

(66) Daniel E. Sichel, "Computers and Aggregate Economic Growth: An Update,"
Business Economics, April 1999, pp. 18-24, Table 1, p. 19.

(67) The contribution of capital deepening to labor productivity growth for
each type of capital equals the rate of growth of the ratio of the capital type
to labor hours multiplied by the income share of the same type of capital. For
example, Oliner and Sichel, op. cit., Tables 1 and 2, pp. 24-25, estimated that
the rate of growth of computer hardware/labor-hour was 33.65 percent during
1996-99 and the corresponding income share of computer hardware was 1.8
percent. Thus, they estimated that the contribution of capital deepening in
computer hardware to labor productivity growth was (33.65) x (0.018) = 0.606
percentage points when average labor productivity growth was 2.57 percent,
yielding a contribution of 0.606/2.57 or 23.6 percent.

(68) U.S. Department of Commerce, The Emerging Digital Economy, April 1998 and
The Emerging Digital Economy II, June 1999.

(69) Oliner and Sichel, op. cit., Table 5, p. 28; Congressional Budget Office,
The Budget and Economic Outlook: Fiscal Years 2001-2010, January 2000, Appendix
A; Economic Report of the President, February 2000, Table 2-3, p. 83; Dale W.
Jorgenson and Kevin J. Stiroh, "Raising the Speed Limit: U. S. Economic Growth
in the Information Age," May 1, 2000, available from kevin.stiroh@ny.frb.org;
Karl Whelan, "Computers, Obsolescence, and Productivity," February 2000, Table
4, p. 34, available from kwhelan@frb.org; and Macroeconomic Advisers, LLC,
"Productivity and Potential GDP in the 'New' US Economy," September 1999, pp.
2-3. Table 4.1 excludes, however, results from Macroeconomic Advisers, LLC
because they pertain to acceleration in potential productivity defined as the
"level of productivity consistent with sustainable utilization rates of capital
and labor," which is different from measured or actual productivity in the
other studies.

(70) Macroeconomic Advisers, op. cit., p. 6.

(71) Emerging Digital Economy II, Table 3.2, p. 29.

(72) Kevin Stiroh, "Computers, Productivity, and Input Substitution," Economic
Inquiry, 1998, v. 36, pp. 175-191.

(73) This finding was reported originally in The Emerging Digital Economy II,
p. 35. More recent BLS data also support the finding.

(74) See Jorgenson and Stiroh, op. cit.

(75) Ibid., pp. 43-44.

(76) See Jack E. Triplett and Barry P. Bosworth, "Productivity in the Services
Sector," Washington, DC: Brookings Institution, January 2000, paper prepared
for the American Economic Association Meetings, Boston, MA, January 7-9, 2000,
Table 3, p. 24.

(77) See citation in footnote 8.

(78) In Figure 4.5, the ten excluded industries are water transportation,
transportation services, depository institutions, nondepository institutions,
holding and investment offices, business services, insurance agents, legal
services, motion pictures, and health services. Based on the classification
established in Emerging Digital Economy II, the first two are non-IT intensive
and the remaining eight are IT-using. BEA estimates the real GPO of the first
five industries by "extrapolation" based on "BEA persons engaged in production"
and the GPO of the sixth industry based on "BLS employment weighted by Census
Bureau receipts." BEA uses separate deflators for outputs and inputs ("double
deflation") for the remaining four industries. See Robert E. Yuskavage,
"Improved Estimates of Gross Product by Industry, 1959-94," Survey of Current
Business, August 1996, p. 145.

(79) However, there will still be many industries awaiting similar improvements
in the future. A comprehensive review of the problems and prospects for their
resolution is available in Triplett and Bosworth, op. cit.

(80) Erik Brynjolfsson and Lorin M. Hitt, "Beyond the Productivity Paradox:
Computers are the Catalyst for Bigger Changes," Communications of the ACM,
August 1998.

(81) Erik Brynjolfsson and Lorin M. Hitt, "Computing Productivity: Are
Computers Pulling Their Weight?," MIT Sloan School of Management, January 2000.

(82) Erik Brynjolfsson and Shinkyu Yang, "The Intangible Costs and Benefits of
Computer Investments: Evidence from the Financial Markets," MIT Sloan School of
Management (December 1999 revised draft). See also Erik Brynjolfsson, Lorin M.
Hitt, and Shinkyu Yang, "Intangible Assets: How the Interaction of Computers
and Organizational Structure Affects Stock Market Valuations,"
(http://ccs.mit.edu/erik).  A related study by Timothy F. Bresnahan, Erik
Brynjolfsson and Lorin M. Hitt, "Information Technology, Workplace Organization
and the Demand for Skilled Labor: Firm-level Evidence," January 2000 draft,
finds that "IT use is complementary to a new workplace organization which
includes broader job responsibilities for line workers, more decentralized
decision-making, and more self-managing teams. In turn, both IT and that new
organization are complements with worker skill, measured in a variety of ways.
...Taken together, the results highlight the roles of both IT and IT-enabled
organizational change as important components of the skill-biased technical
change."

(83) As interpreted by Robert E. Hall, "The Stock Market and Capital
Accumulation," NBER Working Paper 7180, Cambridge, MA: National Bureau of
Economic Research, June 1999, p. 28 (http://www.nber.org/papers/w7180).

(84) This chapter was written by Sandra D. Cooke, Economist, in the Office of
Business and Industrial Analysis.

(85) IT-producing industries produce IT infrastructure and provide services
that enable electronic commerce and the Internet. See Chapter 3 for a list of
IT-producing industries. Note: the focus of this analysis is on the IT
workforce only and not the effects of technology on the general workforce.

(86) Software and computer services include computer services management,
rental and leasing, computer programming services and prepackaged software, all
of which have grown at well above average rates for the past decade.

(87) Carol A. Meares and John Sergeant, "The Digital Workforce: Building
Infotech Skills at the Speed of Innovation," Office of Technology Policy, U.S.
Department of Commerce, 1999.

(88) Don Tapscott, "Strategy in the New Economy," Strategy and Leadership,
November/December, 1997.

(89) Saroja Girishankar, "In Focus: E-Commerce Outsourcing - Internet Time
Forces Anxious Enterprises to Seek Outside Help," Internetweek, June 28, 1999.

(90) Aaron Bernstein, "Down and Out in Silicon Valley," Business Week, March
27, 2000, reports the fact that the success of IT-producing industries in
Silicon Valley has rapidly raised the cost of living, but the earnings of
workers in low-end jobs have not kept pace.

(91) Bob Weistein, "E-commerce Puts Techies Front and Center," Chicago Sun
Times, July 18, 1999.

(92) Cole Gomolski, "IT Job Market, Now and Later," Computerworld, October 28,
1999.

(93) RHI Consulting press release, December 2, 1999 and 2000 Salary Guide. RHI
Consulting collects and reports starting salaries for IT workers. Starting
salaries, unlike occupational averages, exclude bonuses and other factors that
could influence pay, such as seniority and past job performance.

(94) Computerworld's 13th Annual Salary Survey, September 6, 1999
(www.computerworld.com).

(95) Carolyn Veneri, "Can Occupational Labor Shortages be Identified Using
Available Data?" Monthly Labor Review, March 1999.

(96) The BLS analysis concluded that there is no single empirical measure of
labor market tightness, nor does it appear that one can be easily developed.
Labor market data such as employment and wage trends and unemployment rates for
a specific occupation should be examined in addition to supply information
including demographic characteristics, employer requirements for education and
training and education by field of study. For IT occupations in particular,
analysis should be done on a case by case basis and should focus on one or a
group of closely related occupations.

(97) Peter Freeman and William Aspray, The Supply of Information Technology
Workers, Computing Research Association, Washington, DC: 1999.

(98) The National Research Council, in response to a Congressional mandate, will 
deliver two reports to Congress by October 1, 2000 on 1) older workers in
the information technology field and 2) high technology labor market needs.

The U.S. Department of Commerce's Technology Administration (TA) in July 1999
released The Digital Workforce: Building Infotech Skills at the Speed of
Innovation which demonstrates the complexities of trying to define and measure
the IT workforce. The TA will continue to be heavily involved in monitoring the
needs of the IT workforce and making policy recommendations.

The Bureau of Labor Statistics' recently revised Standard Occupational
Classification (SOC) provides more IT occupational detail than in previous
years. The revised SOC classification was used in the 1999 Occupational
Employment Statistics Survey and will be reflected in the 2000-2010 employment
projections and in the 2002-03 edition of the Occupational Outlook Handbook.
Both will be released in late 2001. (http://stats.bls.gov/soc/soc_home.htm)

(99) INS statistics reported in Wall Street Journal article. See Marjorie
Valbrun,"Immigration Foe's Reversal Bodes Well for Silicon Valley," Wall Street
Journal, May 2, 2000.

(100) U.S. Immigration and Naturalization Service, "Characteristics of
Specialty Occupations Workers (H-1B)", February 2000. Preliminary survey
results are for the May 1998 to July 1999 period.

(101) This chapter was written by Dennis Pastore, Economist, in the Office of
Business and Industrial Analysis.

(102) Sales by affiliates are reported on an industry basis while U.S. trade
data are organized by type of product. For this reason, the comparison between
sales (by IT firms) and exports (of IT products) is intended only as an
indication of the relative magnitude of the difference. Furthermore, estimates
of sales by U.S.- and foreign-owned affiliates involve only a subset of the IT
industries, since aggregate data on sales by instrument manufacturing
affiliates are too broad to be included, and data on sales by affiliates of
producers of magnetic and optical recording media are unavailable. The
affiliate total also includes sales by firms in the industries that manufacture
prerecorded records and tapes (SIC 3652) and communications equipment, n.e.c.
(SIC 3669). (Table 6.2) The total for IT exports has been adjusted accordingly.
Altogether in 1997, the United States exported $0.8 billion of prerecorded
records and tapes and communications equipment, n.e.c.

(103) The various classes of IT products include: computers and peripherals,
prepackaged software, electronic components including semiconductors, several
classes of scientific instruments, household audio and video devices, and
telecommunications equipment, primarily telephones and broadcasting equipment.

(104) Exports of all goods from the United States to U.S. Majority-owned IT
affiliates in Table 6.2 totaled $35.6 billion in 1997.

(105) This chapter was written by Lee Price, the Chief Economist of the
Economics and Statistics Administration.

(106) Contrary to much of the media's discussion, economists do not consider
the strong rise in equity prices year after year to be an essential component
of the "New Economy." Indeed, at a recent White House Conference on the New
Economy, William Nordhaus concluded that the IT revolution has generated a new
economy in productivity terms, but worried that unrealistically high stock
prices were damaging on several fronts: national saving, management decisions,
compensation structures, and job choices. William Nordhaus, "What Is the Shape
of the New Economy?", White House Conference on the New Economy, April 5, 2000
(http://www.econ.yale.edu/~nordhaus/homepage/white%20house%20remarks%20040400%20final.htm).

(107) Philip Evans and Thomas S. Wurster, Blown to Bits: How the New Economics
of Informtion Transforms Strategy, Boston: Harvard Business School Press, 1999,
pp. 24-25.

(108) Actual forecasts were 2.1 or 2.2 percent. For purposes of comparison, we
have added 0.2 percentage points to account for definitional changes (e.g.,
treatment of software as investment and revision to the measure of banking)
that BEA initiated in October 1999 and applied to prior years.

(109)  The more optimistic outlook does not come from expectations of faster
growth in hours worked. If anything, the continued reduction in unemployment
leads many economists to anticipate slower hours growth in the medium term.

(110) Quote contained in Louis Uchitelle, "Productivity Finally Shows the
Impact of Computers," New York Times, New York, March 12, 2000.

(111) At some point, U.S. demand growth will slow from its 5+ percent pace of
recent years back to a level consistent with the growth of labor productivity
plus growth of the labor force. In recent years, falling unemployment and a
rising trade deficit have allowed demand growth to exceed trend growth in
potential output. Neither of the first two trends can continue indefinitely.

(112) P.A. David and G. Wright, "Early Twentieth Century Growth Dynamics: An
Inquiry into the Economic History of 'Our Ignorance'," Stanford: SIEPR
Discussion Paper No. 98-3, 1999.

(113) Hal Varian, "The Theory of Recombinant Growth," The Industry Standard,
February 23, 2000.

(114) Edison's "invention factory" did not invent the first or the best light
bulb, electric wiring, power generator, or switch. But, recognizing the need
for thin copper wire to compete with gas lighting, Edison and his team did
create the first "lighting system" designed to optimize the interplay of all
parts in a price competitive system. Using venture capital, he was the first to
go beyond the "tinkering inventor" to create the first "invention factory" with
teams assigned to develop specific related innovations, first in lighting, then
in batteries, recording, and movie cameras.

(115) Alan Greenspan, "Remarks," Survey of Current Business," January 2000, p.
12.

(116) The growth accounting framework, discussed in Chapter IV, makes an
estimate of the contributions of capital and labor to growth, with the residual
part of growth not accounted for by capital or labor often called multi- or
total factor productivity. Although this residual is often viewed as an
indicator of technical change, others have called it a "measure of our
ignorance" of all the factors contributing to growth.

(117) Dale W. Jorgenson and Kevin J. Stiroh, "Raising the Speed Limit: U.S.
Economic Growth in the Information Age," May 1, 2000, forthcoming in Brookings
Papers in Economic Activity, p. 37 
(http://www.economics.harvard.edu/faculty/jorgenson/papers/dj_ks5.pdf).

(118) National Telecommunications and Information Administration, (NTIA) U.S.
Department of Commerce, "Falling Through the Net: Defining the Digital Divide,"
July 1999 (http://www.ntia.doc.gov/ntiahome/digitaldivide/).

(119) Robert W. Taylor and J.C.R. Licklider quoted in David Plotnikoff, "A
Father of the Net Looks back and asks, 'What took so long?'", San Jose Mercury
News, March 12, 2000 
(http://www.mercurycenter.com/svtech/columns/modemdriver/docs/dp031200.htm).

(120) Calculations by the Office of the Chief Economist, U.S. Department of
Commerce based on data from the Bureau of the Census' Current Population Survey
Internet and Computer Use Supplement, 1998 (http://www.bls.census.gov/
cps/computer/computer.htm) and published in NTIA's "Falling Through the Net:
Defining the Digital Divide."

(121) Ibid.