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ICT Diffusion and Economic Growth in New Zealand

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  • Les T. Oxley
  • Kenneth I. Carlaw

Abstract

Two different theoretical treatments of technology diffusion in an economy are examined. The traditional model based on the aggregate production function approach first introduced by Solow (1957) assumes technology is unstructured and arrives as a continuous exogenous flow. This model predicts that the diffusion of new technologies will be contemporaneously correlated with growth in economic performance indicators. An alternative view explicitly models technological structure in the form of complementarities. It also incorporates the observation that new general purpose technologies (GPTs) invariably emerge in a crude form lacking many of the complementarities that enable them to become productive. This view predicts that when new technologies emerge costly investment in developing complementary technologies must take place and thus there will be a lag between the new technology’s introduction and observed growth in economic performance indicators. These two views articulate two general empirically testable hypotheses that are captured in a number of specific tests. One such test measures diffusion of information and communication technologies (ICT) as an independent phenomenon and compares its times series pattern to that of the growth of total factor productivity (TFP) in New Zealand. New Zealand’s experience in consistent with other OECD economies where the diffusion of ICT has occurred at the same time as a TFP slowdown. Another test measures relative ICT-skilled labour demand. Findings support the non-traditional view’s prediction that ICT-skilled labour will increase with the diffusion of ICT technology in New Zealand.

Suggested Citation

  • Les T. Oxley & Kenneth I. Carlaw, 2004. "ICT Diffusion and Economic Growth in New Zealand," Econometric Society 2004 Australasian Meetings 167, Econometric Society.
  • Handle: RePEc:ecm:ausm04:167
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    References listed on IDEAS

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    Cited by:

    1. Marco Capasso & Nelson Correa, 2010. "ICT and Knowledge Complementarities: A Factor Analysis on Growth," Chapters,in: Innovation and Economic Development, chapter 8 Edward Elgar Publishing.

    More about this item

    Keywords

    ICT; Productivity; Diffusion Technology;

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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