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Information Technology and Productivity: Evidence from Country-Level Data

Author

Listed:
  • Sanjeev Dewan

    () (Management Science Department, University of Washington Business School, Seattle, Washington 98195)

  • Kenneth L. Kraemer

    () (Center for Research on Information Technology and Organizations (CRITO), Graduate School of Management, University of California, Irvine, California 92697)

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.

Suggested Citation

  • Sanjeev Dewan & Kenneth L. Kraemer, 2000. "Information Technology and Productivity: Evidence from Country-Level Data," Management Science, INFORMS, vol. 46(4), pages 548-562, April.
  • Handle: RePEc:inm:ormnsc:v:46:y:2000:i:4:p:548-562
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    File URL: http://dx.doi.org/10.1287/mnsc.46.4.548.12057
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    References listed on IDEAS

    as
    1. Sanjeev Dewan & Haim Mendelson, 1998. "Information Technology and Time-Based Competition in Financial Markets," Management Science, INFORMS, vol. 44(5), pages 595-609, May.
    2. J. Bradford De Long & Lawrence H. Summers, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 445-502.
    3. Zvi Griliches, 1998. "R&D and Productivity: The Econometric Evidence," NBER Books, National Bureau of Economic Research, Inc, number gril98-1, December.
    4. Zvi Griliches, 1998. "Introduction to "R&D and Productivity: The Econometric Evidence"," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 1-14 National Bureau of Economic Research, Inc.
    5. Kraemer, Kenneth L. & Dedrick, Jason, 1994. "Payoffs from investment in information technology: Lessons from the Asia-Pacific region," World Development, Elsevier, vol. 22(12), pages 1921-1931, December.
    6. Stephen D. Oliner, 1993. "Constant-Quality Price Change , Depreciation, and Retirement of Mainframe Computers," NBER Chapters,in: Price Measurements and Their Uses, pages 19-62 National Bureau of Economic Research, Inc.
    7. Stephen D. Oliner & Daniel E. Sichel, 1994. "Computers and Output Growth Revisited: How Big Is the Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 273-334.
    8. Erik Brynjolfsson & Lorin Hitt, 1996. "Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending," Management Science, INFORMS, vol. 42(4), pages 541-558, April.
    9. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 327-368.
    10. Sanjeev Dewan & Chung-ki Min, 1997. "The Substitution of Information Technology for Other Factors of Production: A Firm Level Analysis," Management Science, INFORMS, vol. 43(12), pages 1660-1675, December.
    11. Lau, Lawrence J. & Yotopoulos, Pan A., 1989. "The meta-production function approach to technological change in world agriculture," Journal of Development Economics, Elsevier, vol. 31(2), pages 241-269, October.
    12. Lichtenberg, F.R. & Lehr, B., 1996. "Computer Use and Productivity Growth in federal Government Agencies," Papers 96-10, Columbia - Graduate School of Business.
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