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ICT and Productivity Growth in Transition Economies: Two-Phase Convergence and Structural Reforms

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  • Piatkowski, Marcin
  • Bart, van Ark

Abstract

This paper investigates the role of information and communication technology (ICT) as a driver of improved productivity performance of Central and Eastern European (CEE) countries and Russia (CEER) relative to the EU-15 and the U.S. during the 1990s. The paper investigates how, and to what extent, ICT contributed to a narrowing in the productivity gap. Although investment in ICT capital has strongly increased, total factor productivity (TFP) growth has made the largest contribution to convergence during the 1990s. In a few CEER countries, notably the Czech Republic and Hungary, ICT production contributed more to productivity growth than the EU-15 average. Spillovers from a productive use of ICT in both CEER countries and the EU-15 are still considerably lower than in the U.S.. The paper argues that the convergence process between CEER countries and the EU-15 is characterized by two phases. In the first “restructuring” phase, convergence has been driven by enterprise restructuring in manufacturing, which was facilitated by rapid ICT investment in new plants, and by growth in ICT production in particular through FDI. In the second “expansionary” phase the sustained convergence has to rely more on productivity growth in sectors that make intensive use of ICT, in particular the service sector. While the first phase is dependent largely on openness and basic fundamental reforms, the second phase requires deeper structural reforms focused on product and labor market flexibility, business re-organization and investment in human capital and ICT skills.

Suggested Citation

  • Piatkowski, Marcin & Bart, van Ark, 2005. "ICT and Productivity Growth in Transition Economies: Two-Phase Convergence and Structural Reforms," MPRA Paper 29398, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:29398
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    File URL: https://mpra.ub.uni-muenchen.de/29398/1/MPRA_paper_29398.pdf
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    Citations

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    Cited by:

    1. Dale W. Jorgenson & Khuong Vu, 2005. "Information technology and the world economy," Proceedings, Federal Reserve Bank of San Francisco.
    2. Bianka Dettmer, 2012. "The European Union's service directive: Contrasting ex ante estimates with empirical evidence," Jena Economic Research Papers 2012-019, Friedrich-Schiller-University Jena.
    3. Dale W. Jorgenson & Khuong Minh Vu, 2010. "Latin America and the World Economy," Chapters,in: Innovation and Economic Development, chapter 1 Edward Elgar Publishing.
    4. Dale W. Jorgenson & Khuong Vu, 2007. "Information Technology and the World Growth Resurgence," German Economic Review, Verein für Socialpolitik, vol. 8, pages 125-145, May.
    5. Jan Hagemejer & Michal Gradzewicz & Zbigniew Zolkiewski, "undated". "Globalization and the Polish Economy: Some Stylized Facts and CGE Model Simulations," EcoMod2007 23900033, EcoMod.
    6. Gradzewicz, Michał & Hagemejer, Jan & Zbigniew, Żółkiewski, 2007. "Globalization and the Polish economy: stylized facts and simulations using a Computable General Equilibrium Model," MPRA Paper 28228, University Library of Munich, Germany.

    More about this item

    Keywords

    productivity; economic growth; convergence; ICT; Eastern Europe;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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