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Productivity of ICT and non-ICT capital: The role of rates of return and capital prices

  • Niebel, Thomas
  • Saam, Marianne

We investigate the role rates of return and rates of asset price decline play in explaining sources of productivity growth in the context of a growth accounting approach. Our analysis is based on data from the EU KLEMS database for seven countries in the period of 1990 - 2007. We introduce a constant rate of return to capital and a constant rate of ICT price decline across sectors, countries and time. The main result of this sensitivity analysis is that both alternative measurements somewhat downplay the role investment played relative to growth in multi-factor productivity in the UK and the US during 1995 - 2000. Moreover, we show that more than half of the ICT contribution to labor productivity growth results from growth in capital quality and composition rather than quantity.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 11-083.

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Date of creation: 2011
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Handle: RePEc:zbw:zewdip:11083
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  1. Robert Inklaar & Mary O'Mahony & Marcel Timmer, 2005. "ICT AND EUROPE's PRODUCTIVITY PERFORMANCE: INDUSTRY-LEVEL GROWTH ACCOUNT COMPARISONS WITH THE UNITED STATES," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(4), pages 505-536, December.
  2. Andrea Bassanini & Stefano Scarpetta, 2002. "Growth, Technological Change, and ICT Diffusion: Recent Evidence from OECD Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 18(3), pages 324-344.
  3. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2005. "Productivity, Volume 3: Information Technology and the American Growth Resurgence," MIT Press Books, The MIT Press, edition 1, volume 3, number 0262101114, June.
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