We examine the impact of information technology (IT) on productivity in the public sector econometrically, using data from the BLS Federal Productivity Measurement Program and from Computer Intelligence Infocorp, and by interviewing some government officials. We estimate a production function for government services that includes IT capital as an input, and find a strong positive relationship across federal agencies between productivity growth and computer-intensity growth during the period 1987–92, controlling for growth in compensation and other outlays per employee, and in the number of employees. Our estimates are consistent with the hypothesis that there are ‘excess returns’ to IT capital.