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How ICT Investment and Energy Use Influence the Productivity of Korean Industries

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  • Khayyat, Nabaz T.

    ()
    (Seoul National University)

  • Lee, Jongsu

    ()
    (Seoul National University)

  • Heshmati, Almas

    ()
    (Jönköping University, Sogang University)

Abstract

This empirical study examines changes in industrial productivity in Korea between 1980 and 2009, focusing on how investment in information and communication technology (ICT) and energy use, influence productivity levels. A dynamic factor demand model is applied in order to link inter-temporal production decisions by explicitly recognizing that the level of certain factors of production cannot be changed without incurring so-called adjustment costs, defined in terms of forgone output from current production. In particular, we investigate how the ICT–energy relationship affects total factor productivity growth in 30 industrial sectors. Describing industry-specific productivity levels is important for policymakers when the allocation of public investment and support is limited. The results presented herein show that ICT/non-ICT capital investment are substitutes for labor and energy use. We also find a high output growth rate in the sampled sectors, and increasing returns to scale, whose effects on the TFP component are higher than those of technological progress.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 8080.

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Length: 36 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:iza:izadps:dp8080

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Keywords: dynamic factor demand; panel data; ICT investment; energy use; productivity;

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  1. M. Ishaq Nadiri & Ingmar R. Prucha, 1999. "Dynamic Factor Demand Models and Productivity Analysis," NBER Working Papers 7079, National Bureau of Economic Research, Inc.
  2. M. Ishaq Nadiri & Ingmar R. Prucha, 1999. "Dynamic Factor Demand Models and Productivity Analysis," Electronic Working Papers, University of Maryland, Department of Economics 99-005, University of Maryland, Department of Economics.
  3. repec:umd:umdeco:prucha3 is not listed on IDEAS
  4. Mokyr, Joel, 2005. "Long-Term Economic Growth and the History of Technology," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 17, pages 1113-1180 Elsevier.
  5. Polder, Michael & Leeuwen, George van & Mohnen, Pierre & Raymond, Wladimir, 2009. "Productivity effects of innovation modes," MPRA Paper 18893, University Library of Munich, Germany.
  6. Lau, Lawrence J., 1986. "Functional forms in econometric model building," Handbook of Econometrics, Elsevier, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 26, pages 1515-1566 Elsevier.
  7. Huggett, Mark & Ospina, Sandra, 2001. "Does productivity growth fall after the adoption of new technology?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 48(1), pages 173-195, August.
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