WASHINGTON, DC, March 13, 2007 -- Information technology is responsible for nearly all of pickup in economic growth over the last decade, adding $2 trillion annual to the economy, according to a new report released today by the Information Technology & Innovation Foundation (ITIF). The report, entitled Digital Prosperity: Understanding the Economic Benefits of the Information Technology Revolution, found that the economic transformation resulting from IT was occurring at adoption rates exceeding even the most optimistic forecasts of the late 1990s. The integration of IT into virtually all aspects of the economy and society is creating a digitally enabled economy that is responsible for generating the lion's share of economic growth and prosperity, here and abroad, including in developing nations.

"For the United States alone, what we found was that because of the digital revolution, GDP is $2 trillion larger today than it would have been had growth in the post-1995 era proceeded at the 1974 to 1995 rate," said Robert D. Atkinson, Ph.D., President of the Information Technology & Innovation Foundation. "We need to recognize this phenomenon and adjust our thinking to make IT a centerpiece of our economic policy - from planning and forecasting to tax policies that incent future growth."

Key Highlights from the report include:

-- While productivity impacts from IT are among the highest in the United States, most other nations have benefited from the IT revolution as well, including Australia, Canada, Finland, France, Germany, Korea, Japan, the Netherlands, and Switzerland. Moreover, while its impact is not as large in most developing nations, IT is making a difference, in part because IT expenditures rose twice as fast in developing nations from 1993 to 2001 compared to the Organization for Economic Co-operation and Development (OECD) average. For example, IT usage in China was responsible for 38 percent of the increase in total factor productivity growth and 21 percent of GDP growth.

-- While the emerging digital economy has produced enormous benefits, there is still significant potential growth to be derived from leveraging IT. Policymakers in developed and developing nations must work to ensure that future policies and programs they put in place spur digital transformation so that all their citizens can fully benefit.

"First and foremost, policies to support digital transformation need to become the fourth leg of economic policy alongside fiscal, monetary and investment policy," said Atkinson. "In particular, this means that policy makers must adopt an approach that incorporates IT transformation in all that they do. Accelerating digital transformation is likely to be the most important step policy makers can take to ensure robust economic growth in the future."

The report also recommends that policymakers:

-- Actively Encourage Digital Innovation and Transformation of Economic Sectors: The private sector will drive much of digital transformation, but government can play a supportive role. Government should support research in emerging IT areas. IT should also use a wide array of policy levers, including tax, regulatory, and procurement policies, to spur greater IT innovation and transformation, particularly in key sectors like health care, education, transportation, and others influenced by public policy. Moreover, government should lead by example by leveraging their own IT efforts to achieve more effective and productive public sector management and administration.

-- Use the Tax Code to Spur IT Investment: Investment is how IT innovations are diffused throughout the economy. Because IT seems have a much larger impact on productivity, tax policies should focus on spurring additional investment in newer generations of IT.

-- Encourage Universal Digital Literacy and Digital Technology Adoption: Ensuring that societies take full advantage of the IT revolution will require that the large majority of citizens participate in the digital economy. National governments need to work in partnership with the for-profit, non-profit, and state and local government sectors to help citizens use and access technology.

-- Do No Harm: Making digital transformation the center of economic policy means not just supporting IT, just as importantly it means avoiding harming the digital engine of growth. All too often well- intentioned policymakers consider laws and regulations that would slow digital transformation.

To download a copy of the report (4MB PDF), go to: http://www.itif.org/files/digital_prosperity.pdf.

About ITIF

ITIF is a non-profit, 501(c)(3), non-partisan public policy think tank committed to articulating and advancing a pro-productivity, pro-innovation and pro-technology public policy agenda internationally, in Washington and the states. Recognizing the vital role of technology in ensuring prosperity, ITIF focuses on innovation, productivity, and digital economy issues.