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ICT use and total factor productivity growth: intangible capital or productive externalities?

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  • Ram C. Acharya

Abstract

What accounts for the exceptional TFP growth performance in some ICT-using industries after the mid-1990s in the USA and some other OECD countries? Productivity gains in the production of ICT are given as the answer. But technical progress in upstream industries, in general, should not raise TFP growth in downstream industries. This article investigates two explanations for this apparent puzzle: the existence of intangible capital and the externalities of ICT investment. Using newly constructed comprehensive data covering 16 OECD countries for 24 industries for a period of 32 years, I find evidence of intangible capital accumulation, but no evidence of positive spillovers from ICT use. Results show that what would have considered as a perfect case of spillovers from ICT use under conventional method is the impact of R&D and other intangible capital. Once these two channels are accounted for in the model, neither domestic nor foreign ICT spillovers exist.

Suggested Citation

  • Ram C. Acharya, 2016. "ICT use and total factor productivity growth: intangible capital or productive externalities?," Oxford Economic Papers, Oxford University Press, vol. 68(1), pages 16-39.
    • Handle: RePEc:oup:oxecpp:v:68:y:2016:i:1:p:16-39.
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    File URL: http://hdl.handle.net/10.1093/oep/gpv058
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    Cited by:

    1. Carol Corrado & Jonathan Haskel & Cecilia Jona-Lasinio, 2017. "Knowledge Spillovers, ICT and Productivity Growth," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 592-618, August.
    2. Elstner, Steffen & Grimme, Christian & Kecht, Valentin & Lehmann, Robert, 2022. "The diffusion of technological progress in ICT," European Economic Review, Elsevier, vol. 149(C).
    3. Nonnis, Alberto & Bounfour, Ahmed & Kim, Keungoui, 2023. "Knowledge spillovers and intangible complementarities: Empirical case of European countries," Research Policy, Elsevier, vol. 52(1).
    4. Eva Erjavec, 2023. "Going digital and intangible: intangible investments effects on a company’s success," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 3, pages 275-294.
    5. Jeffrey Mollins & Temel Taskin, 2023. "Digitalization: Productivity," Discussion Papers 2023-17, Bank of Canada.
    6. Joël Cariolle & Maëlan le Goff, 2023. "Spatial Internet Spillovers in Manufacturing," Journal of Development Studies, Taylor & Francis Journals, vol. 59(8), pages 1163-1186, August.
    7. Kim, Keungoui & Bounfour, Ahmed & Nonnis, Alberto & Özaygen, Altay, 2021. "Measuring ICT externalities and their contribution to productivity: A bilateral trade based approach," Telecommunications Policy, Elsevier, vol. 45(2).
    8. Steff De Visscher & Markus Eberhardt & Gerdie Everaert, 2017. "Measuring productivity and absorptive capacity evolution," Discussion Papers 2017-11, University of Nottingham, GEP.
    9. Uwitonze, Eric & Heshmati, Almas, 2016. "Service Sector Development and its Determinants in Rwanda," IZA Discussion Papers 10117, Institute of Labor Economics (IZA).
    10. Eberhardt, Markus & Everaert, Gerdie & De Visscher, Stef, 2017. "Measuring Productivity and Absorptive Capacity Evolution in OECD Economies," CEPR Discussion Papers 12261, C.E.P.R. Discussion Papers.
    11. Pieri, Fabio & Vecchi, Michela & Venturini, Francesco, 2018. "Modelling the joint impact of R&D and ICT on productivity: A frontier analysis approach," Research Policy, Elsevier, vol. 47(9), pages 1842-1852.
    12. Muhammad Salam & Javed Iqbal & Anwar Hussain & Hamid Iqbal, 2018. "The Determinants of Services Sector Growth: A Comparative Analysis of Selected Developed and Developing Economies," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 57(1), pages 27-44.
    13. De Visscher, Stef & Eberhardt, Markus & Everaert, Gerdie, 2020. "Estimating and testing the multicountry endogenous growth model," Journal of International Economics, Elsevier, vol. 125(C).
    14. Qing Li & Yanrui Wu, 2023. "ICT, technological diffusion and economic growth in Chinese cities," Empirical Economics, Springer, vol. 64(4), pages 1737-1768, April.
    15. Obasa, Rotimi Sunday Mr. & Gurowa, S. U, 2023. "Effect of Information and Communication Technology on Financial Performance of Deposit Money Bank in Nigeria," Thesis Commons c7x45, Center for Open Science.
    16. Huwei Wen & Jinxia Zhan, 2023. "New-type infrastructure and total factor productivity: evidence from listed manufacturing firms in China," Economic Change and Restructuring, Springer, vol. 56(6), pages 4465-4489, December.
    17. Gao, Yanyan & Zang, Leizhen & Sun, Jun, 2018. "Does computer penetration increase farmers’ income? An empirical study from China," Telecommunications Policy, Elsevier, vol. 42(5), pages 345-360.
    18. Saam, Marianne & Niebel, Thomas & Schulte, Patrick, 2017. "The sectoral impact of the digitisation of the economy: Final report," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 181911.

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