Growth of ICT Capital and Deceleration of Labour Productivity in the EU Countries: The Missing Links

Abstract

Labour productivity in most of the EU countries grew much slower than in US over the last one and a half decades and the difference is attributed to the difference in the use of ICT. Analysing EU KLEMS database (capital (K), labour (L), energy (E), material (M) and service inputs (S)) and Eurostat database it is noted that the micro and small enterprises, numerically predominant in the EU countries, use much less amount of ICT. With very low proportion of enterprises with ICT installation, with less sophisticated technology and probably with the lowest amount of ICT capital, these enterprises employ relatively larger proportion of workers who use ICTs. The larger enterprises on the other hand with more sophisticated and larger quantity ICT capital employ fewer workers who handle this technology. An implication of this is the fast growth of productivity of selected highly ICT skilled workers of the larger enterprises leaving rest of the workforce to benefit least from the technology. It is obvious under this situation that the overall productivity growth of the workers would be stunted.