Does information and communication technology improve labor productivity? Recent evidence from the Southeast Asian emerging economies

Abstract

The comprehension of the textbook and augmented Solow growth model has been studied to picture the consequences of workforce growth and capital. In the age of digitalization, Information and Communications Technology (ICT) is also the first necessity identified factors affecting labor productivity. This paper revisits the augmented Solow growth equation by integrating ICT as an explanator that improves labor productivity in Southeast Asian emerging economies. We used a Two‐Way Random‐Effects Model to regress the impact of workforce growth rate, physical capital, and human capital on labor productivity. The results show that using human capital is essential to improve output in emerging market countries rather than only using physical capital. According to our adjusted ICT factors, our analysis reveals that using the Internet and mobile cellular significantly boosts labor productivity. Moreover, the analysis of total factor productivity shows that most Southeast Asian economies highly depend on implementing ICT, especially the contribution of Internet usage and mobile cellular. Therefore, this study contributes to further studies and policy recommendations in improving the introduction of Internet usage and installation, especially for the emerging Southeast Asian.