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Is there an ICT impact on TFP? A heterogeneous dynamic panel approach

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  • Mary O'Mahony
  • Dr Michela Vecchi

Abstract

Using a new set of industry data for the US and the UK and an appropriate econometric approach, this paper provides new evidence on the impact of Information and Communication Technology (ICT) on Total Factor Productivity (TFP). We compare the results from standard panel data techniques with an heterogeneous dynamic panel data estimation method. The traditional industry panel data analysis fails to find a positive impact of ICT on output/TFP growth. This paper argues that this is due to heterogeneity across industries, particularly in the time dimension. The alternative technique we use, which allows for industry specific dynamics, yields a positive and significant long-run impact of ICT on TFP.

Suggested Citation

  • Mary O'Mahony & Dr Michela Vecchi, 2003. "Is there an ICT impact on TFP? A heterogeneous dynamic panel approach," National Institute of Economic and Social Research (NIESR) Discussion Papers 219, National Institute of Economic and Social Research.
    • Handle: RePEc:nsr:niesrd:219
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    Cited by:

    1. Alexandre Repkine, 2008. "Ict Penetration And Aggregate Production Efficiency: Empirical Evidence For A Cross-Section Of Fifty Countries," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ).
    2. Fachin, Stefano & Gavosto, Andrea, 2007. "The decline in Italian productivity: a study in estimation of long-Run trends in Total Factor Productivity with panel cointegration methods," MPRA Paper 3112, University Library of Munich, Germany.
    3. Mirko Draca & Raffaella Sadun & John Van Reenen, 2006. "Productivity and ICT: A Review of the Evidence," CEP Discussion Papers dp0749, Centre for Economic Performance, LSE.
    4. Roth,Felix & Thum, Anna-Elisabeth, 2010. "Does intangible capital affect economic growth?," CEPS Papers 3667, Centre for European Policy Studies.
    5. Federico Biagi, 2013. "ICT and Productivity: A Review of the Literature," JRC Working Papers on Digital Economy 2013-09, Joint Research Centre.
    6. Stefano Fachin & Andrea Gavosto, 2010. "Trends of labour productivity in Italy: a study with panel co‐integration methods," International Journal of Manpower, Emerald Group Publishing Limited, vol. 31(7), pages 755-769, October.
    7. Francesco Venturini, 2005. "How Much Does IT Consumption Matter for Growth? Evidence from National Accounts," Rivista di Politica Economica, SIPI Spa, vol. 95(1), pages 57-110, January-F.

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