Information Technology and Productivity: Evidence from Country-Level Data

Abstract

This paper studies a key driver of the demand for the products and services of the global IT industry---returns from IT investments. We estimate an intercountry production function relating IT and non-IT inputs to GDP output, on panel data from 36 countries over the 1985--1993 period. We find significant differences between developed and developing countries with respect to their structure of returns from capital investments. For the developed countries in the sample, returns from IT capital investments are estimated to be positive and significant, while returns from non-IT capital investments are not commensurate with relative factor shares. The situation is reversed for the developing countries subsample, where returns from non-IT capital are quite substantial, but those from IT capital investments are not statistically significant. We estimate output growth contributions of IT and non-IT capital and discuss the contrasting policy implications for capital investment by developed and developing economies.information technology, international, productivity paradox, capital investment, information technology investment

IT diffusion in developing countries

“…Once the level of complementary assets reaches a certain level, the marginal impact of an additional phone line, or of an extra percentage point in tertiary education, may be diminished. In contrast, we would expect that the impact of complementary assets would be greater in developing countries, which are still in the process of creating adequate levels of such assets [6].…”

“…As later adopters, they have access to lower cost, easier-to-use technology, and can learn from the experience of developed countries in using IT. However, studies that compare developed and developing countries find that IT investment has a positive and significant relationship with productivity growth at the macroeconomic level in developed countries, but not in developing countries [6].…”

Digital Transformation and Its Influence on GDP

“…Some authors have doubts regarding influence of ICT investment in less developed or developing countries. Therefore, group of authors suggest that this influence is significantly smaller in developing economies which they suggest is influenced by human capital, knowledge-based structures and small previous IT investment which are prerequisite for productivity of current ICT investment (Dewan & Kraemer, 2000). Some researchers, for example Kiley, state that impact of ICT on economic growth is even negative due to adjustment cost (Kiley, 1999).…”

The influence of B2B e-commerce on SMEs' performance and efficiency: a review of the literature

“…Many studies such as Tang, et al (2004), and Dewan and Kraemer (2000) show that IT applications such as B2B systems improve performance at a general level such as industry, supply chain level, and economy level. However, Carr (2003) noted that few studies examine the effects of B2B system adoption at the enterprise level.…”

“…In this paper, four indicators such as productivity, profits, sales, and costs are used to measure the performance before and after adoption of B2B (Dewan & Kraemer, 2000). Efficiency 3 could be examined by how the enterprises minimise the input to give a certain level of output.…”