ICT AND EUROPE's PRODUCTIVITY PERFORMANCE: INDUSTRY-LEVEL GROWTH ACCOUNT COMPARISONS WITH THE UNITED STATES (original) (raw)
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ICT Investment and Growth Accounts for the European Union 1980-2000
This report provides new series of ICT investment and ICT capital, estimates of the contribution of ICT capital to output and labour productivity growth, and the TFP contribution stemming from ICT production for the European Union from 1980 to 2000. The investment numbers are based on series from national statistical offices, complemented with new estimates which are specifically constructed for this study. The main findings are that even though real investment and capital service flows in the EU increased as rapidly as in the U.S., the shares of ICT in total investment and capital service flows in the EU have been approximately half to two thirds of the U.S. level throughout the period. In relative terms ICT capital in the EU was about half of the U.S. contribution to labour productivity growth up to the mid 1990s. Since the mid 1990s the relative contribution of ICT capital improved, but overall EU productivity growth collapsed. The study shows large variations in terms of ICT and TFP contributions to labour productivity growth between European countries, but no EU country (except Ireland) is ahead of the U.S. in terms of the total contribution from ICT.
Growth of ICT Capital and Deceleration of Labour Productivity in the EU Countries: The Missing Links
Computer and Information Science, 2012
Labour productivity in most of the EU countries grew much slower than in US over the last one and a half decades and the difference is attributed to the difference in the use of ICT. Analysing EU KLEMS database (capital (K), labour (L), energy (E), material (M) and service inputs (S)) and Eurostat database it is noted that the micro and small enterprises, numerically predominant in the EU countries, use much less amount of ICT. With very low proportion of enterprises with ICT installation, with less sophisticated technology and probably with the lowest amount of ICT capital, these enterprises employ relatively larger proportion of workers who use ICTs. The larger enterprises on the other hand with more sophisticated and larger quantity ICT capital employ fewer workers who handle this technology. An implication of this is the fast growth of productivity of selected highly ICT skilled workers of the larger enterprises leaving rest of the workforce to benefit least from the technology. It is obvious under this situation that the overall productivity growth of the workers would be stunted.
Catching up or getting stuck? Europe's troubles to exploit ICT's productivity potential
2006
In this paper we extend our previous analysis of the comparative productivity performance of Europe and the U.S. to 2004, thereby covering the latest full business cycle. Our main finding is that the slower contribution of ICT to productivity growth in the EU compared to the U.S. has persisted into the early part of the 21st century. The growth differential even increased since 2000, as the U.S. shows strong labour productivity advances in market services. This may be related to a more productive use of ICT in the U.S.. However, at industry level we find no support for significant TFP (total factor productivity) spillovers from ICT investment, neither in the U.S. nor in European countries. In the 1980s we even find that ICT investment and TFP growth are negatively related, with at best normal returns in the 1970s and 1990s. We speculate that this U-shaped pattern is driven by "hard savings" from ICT investment that first lead to earning normal returns, followed by a period of experimentation during which ICT and TFP growth are negatively related. Ultimately, "soft savings" lead to productivity gains from ICT in line with the marginal cost of ICT. We argue that the realization of productivity effects from soft savings is highly dependent on the competitive process that stimulates complementary innovations and weeds out inefficient users of ICT technology. Europe risks getting stuck in an environment where the productivity gains from soft savings from ICT remain unrealized. 2 The trend growth in productivity for both the U.S. and the EU-15 was estimated using historical annual data from 1979-2004. The Hodrick-Prescott (1997) filter we employ separates the cyclical effects from the long-term, or structural, component of productivity growth. Business cycles in the U.S. and the EU are not completed synchronised but the divergent trend growth rates are clear. Note that the trend estimates for especially the final two years are less reliable than for earlier years.
The Impact of ICT on Labour Productivity – Europe vs. U.S
SHS Web of Conferences
Research background: The European economy has been experiencing declining productivity growth rates since the 1970s despite high investments in information and communication technologies (ICT). Investments in ICT are considered a key driver of productivity growth that serves as a basis for further improvements in living standards. However, despite the emergence of new technologies and industries, especially after 1995, European productivity growth has slowed and lagged behind the United States. The critical question is why? Purpose of the article: This article aims to examine the effects of ICT on the European labour market in the period when machines and systems such as artificial intelligence, new information technologies, the Internet of things, and other technologies are becoming increasingly interconnected and intertwined. Additionally, the article examines the key reasons why European productivity lags behind the U.S. and explains them. Methods: The panel regression method ana...
2003
Solow's paradox has disappeared in the United States but remains alive and well in the United Kingdom. In particular, the U.K. experienced an information and communications technology (ICT) investment boom in the 1990s in parallel with the U.S., but measured total factor productivity has decelerated rather than accelerated in recent years. We ask whether ICT can explain the divergent TFP performance in the two countries. Stories of ICT as a 'general purpose technology' suggest that measured TFP should rise in ICT-using sectors (reflecting either unobserved accumulation of intangible organizational capital; spillovers; or both), but perhaps with long lags. Contemporaneously, investments in ICT may in fact be associated with lower TFP as resources are diverted to reorganization and learning. In both the U.S. and U.K., we find a strong correlation between ICT use and industry TFP growth. The U.S. results are consistent with GPT stories: the acceleration after the mid-1990s was broadbased-located primarily in ICT-using industries rather than ICT-producing industries. Furthermore, industry TFP growth is positively correlated with industry ICT capital growth in the 1980s and early 1990s. Indeed, as GPT stories would suggest, controlling for past ICT growth, industry TFP growth appears negatively correlated with increases in ICT usage in the late 1990s. A somewhat different picture emerges for the U.K. TFP growth does not appear correlated with lagged ICT investment. But TFP growth in the 1990s is strongly and positively associated with the growth of ICT capital services, while being strongly and negatively associated with the growth of ICT investment. If, as we argue, unmeasured investment in complementary capital is correlated with ICT investment, then this finding too is consistent with the GPT story. However, comparing the first and second halves of the 1990s, the net effect of ICT is positive, suggesting that ICT cannot explain the observed TFP slowdown. On the other hand, our results do suggest, albeit tentatively, that the U.K. could see an acceleration in TFP growth over the next decade.
International Productivity Monitor, 2003
To better understand what is causing these differences it is necessary to look beyond the aggregate picture and study growth at the industry level. Because we lack data for ICT investment at the industry level for many countries, our focus here is on labour productivity rather than total factor productivity. Moreover, our estimates are for value added per person employed rather than value added per hour worked. In the next sections we describe our database on labour productivity growth at the industry level and introduce a distinction ...
ICT and Productivity in Europe and the United States Where Do the Differences Come From?
CESifo Economic Studies, 2003
E Ec co on no om mi ic cs s P Pr ro og gr ra am m W Wo or rk ki in ng g P Pa ap pe er r S Se er ri ie es s ICT and Productivity in Europe and the United States Where do the differences come from? Abstract: In this paper we analyse labour productivity growth in 51 industries in European countries and the United States. Using shift-share techniques we identify the industries in which the U.S. is leading most strongly. With a detailed decomposition analysis we identify whether the sources of the U.S. advantage are due to faster productivity growth, higher industry productivity levels relative to the country aggregate, different employment shares or faster change in employment shares of rapidly growing industries. The results show that U.S. productivity has grown faster than in the EU because of a larger employment share in the ICT producing sector and faster productivity growth in services industries that make intensive use of ICT. Wholesale and retail trade and the financial securities industry account for most of the difference in aggregate productivity growth between the EU and the U.S. (JEL N10, O47, O57)