ICT investments and productivity: Measuring the contribution of ICTS to growth

Abstract

This study uses an econometric approach to estimate the contribution of three types of ICT investments (computer, software and communication) in 26 industries (the whole business sector) in 18 OECD countries over 1995-2007, based on the EU KLEMS Database. The estimated contribution of ICT investments to value added growth in the business sector varies from 1.0% a year in Australia to 0.4% a year in Japan. In one-third of the countries considered, the contribution of ICT investment was bigger or equal to the contribution of non-ICT investments. In most countries, computing equipment provided the largest contribution and accounted for over 50% of the overall ICT contribution. The only exceptions are Finland, where investments in communication equipment exceeded those in computing equipment, and Japan, where software was the most dynamic component of ICT investments. ICT producing industries account for no less than two-thirds of total factor productivity (TFP) growth in Germany, Slovenia and the United Kingdom, about 60% in the United States and just below 50% in France and the Netherlands. In Denmark, the Czech Republic and Italy, TFP increased in the ICT producing industries whereas it decreased for the total business sector. JEL classification: O47, E23, E22. Keywords: Growth accounting, ICT, GMM, EU KLEMS.