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The New Economy in Growth and Development

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  • Matti Pohjola

Abstract

The benefits from the New Economy should accrue as improvements in productivity and economic growth. But while the use of information and communication technology (ICT) seems to have had a substantial impact on the performance of the United States economy, the evidence for other countries is much weaker. This study does not find any significant correlation between ICT investment and economic growth in the period 1985--99 for a sample of 42 countries for which ICT spending data are available. Even more surprisingly and in contrast with some previous studies, the relationship is not statistically significant for the subsamples of industrial or high-income countries either. There are at least three possible explanations for this apparent 'productivity paradox'. The most obvious is the fact that not many countries, other than the USA, have yet invested much in ICT. The second reason is that even if they have done so, they may not have invested enough in complementary infrastructure, such as education and skills, in order to reap the benefits from ICT investment. Technology by itself is not a solution to any development problem; it only provides an opportunity. The third and the most controversial explanation is that the neoclassical method applied in assessing the benefits may not capture the most essential aspects of the New Economy or the ICT revolution. The benefits may not lie in the supply side of the economy but in the demand side. Copyright 2002, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

Volume (Year): 18 (2002)
Issue (Month): 3 ()
Pages: 380-396

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Handle: RePEc:oup:oxford:v:18:y:2002:i:3:p:380-396

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Web page: http://oxrep.oupjournals.org/

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Cited by:
  1. Abdur Chowdhury, 2003. "Information technology and productivity payoff in the banking industry: evidence from the emerging markets," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(6), pages 693-708.
  2. Jonathan Temple, 2002. "An Assessment of the New Economy," Bristol Economics Discussion Papers 02/542, Department of Economics, University of Bristol, UK.
  3. Samoilenko, Sergey & Osei-Bryson, Kweku-Muata, 2008. "An exploration of the effects of the interaction between ICT and labor force on economic growth in transition economies," International Journal of Production Economics, Elsevier, vol. 115(2), pages 471-481, October.
  4. Ronald Kumar & Madhukar Singh, 2014. "Role of health expenditure and ICT in a small island economy: a study of Fiji," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(4), pages 2295-2311, July.
  5. Erkan Erdil & Burcu Turkcan & I. Hakan Yetkiner, 2009. "Does Information and Communication Technology Sustain Economic Growth? The Underdeveloped and Developing Countries Case," STPS Working Papers 0903, STPS - Science and Technology Policy Studies Center, Middle East Technical University, revised Nov 2009.

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