ICT capital
6. Conclusions and Recommendations for Economic Policy
ICT had a large contribution to GDP and labour productivity growth in CEE countries.
During 1995-2001 ICT – through increase in the value of ICT capital and TFP growth in ICT producing sector – brought on average 0.87 of a percentage point of output growth in the four CEE countries (Czech Republic, Hungary, Poland and Slovakia), the only countries for which sufficient data was available. The aggregate contribution of ICT in these countries was higher than the EU-15 average of 0.73 of a percentage point. This suggests that ICT has contributed to a convergence process between these CEE countries and the EU-15.
ICT capital alone contributed on average 0.61 of a percentage point to output growth in the five leading CEE countries - Czech Republic, Hungary, Poland, Slovakia and Slovenia – substantially higher than the EU-15 average of 0.46. The large contributions of ICT capital seem to be higher than what one might expect on the basis of the level of GDP or productivity per capita. There are however substantial differences among the CEE countries: the contribution of ICT capital to output growth in Bulgaria, Romania, and Russia was much lower than in the leading CEE countries and also lower than in the EU average. Similar pattern emerges from the comparison of the contribution of ICT capital to labour productivity growth. Hence, in the case of the three lagging CEE countries, ICT seems to have led to a divergence rather than convergence with the income levels in the EU-15.
Since the easy-to-utilize post-transition growth reserves have been by now mostly exhausted, it seems that the future growth in the CEE economies will have to be largely dependent on an ability to productively use ICT. According to the projection developed in this study, in Poland the ICT capital is likely to contribute 0.6 of a percentage point of an average GDP growth of 4% until 2025. This projection however does not take into account opportunities for finding new, more productive application for ICT, which could further lift the contribution of ICT to growth and productivity.
ICT are also likely to stimulate productivity growth through the so-called spillover effects.
Thanks to ICT, which dramatically accelerate the pace of innovation and diffusion of knowledge, firms, industries and whole economies will stand a chance to accelerate productivity growth through imitation and absorption of concepts, models and ideas developed in other, more advanced countries.
However, ICT will not be productively utilized without changes in the structure, organization and business models of firms and without improvement in ICT skills of the labour force. On the macro level, as indicated by the “New Economy Indicator”, ICT is not likely to rapidly diffuse without consistent progress in economic, institutional, and regulatory infrastructure.
In order to fully benefit from ICT, economic policies should focus on creating friendly business environment, opening borders to trade, increasing inflows of foreign capital and spending on human capital, improving effectiveness of law enforcement, enhancing macroeconomic stability and – above all – promoting vigorous competition in the labour and product markets.
As for more specific recommendations, development of public e-services could have considerable contribution to stimulation of the use of ICT among firms and individuals.
Similarly, universal use of online public procurement platforms would not only bring savings
to the public administration, decrease bureaucracy and the scope for corruption, but would also galvanize interest of firms in using more advanced ICT applications (like, for instance, e-commerce) also in the private sector. Public e-procurement could then have sizable spillover effects.
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Appendix Table 10: The New Economy Indicator: values for the CEE countries, EU-15 and the US, 1995-2001 average
Sweden 1 9.882 0.818 1.724 -0.067 0.541 2.273 1.884 0.334 0.641 1.257 0.476
Netherlands 2 8.001 1.035 0.765 0.975 1.197 0.513 -0.195 1.099 0.641 1.600 0.370
Denmark 3 7.331 0.914 1.439 -0.278 -0.217 0.614 2.453 0.898 0.641 0.462 0.404
Ireland 5 6.210 0.977 0.710 -0.716 1.395 0.393 -0.403 0.634 1.539 1.283 0.397
UK 4 6.343 0.830 0.300 2.102 0.554 -0.262 -0.213 0.245 1.240 1.228 0.318
Belgium 6 5.624 0.254 0.257 1.843 0.253 0.467 0.810 0.161 0.142 1.006 0.430
Finland 9 4.857 0.754 1.260 -1.615 1.510 1.201 -0.239 1.098 1.040 -0.540 0.387
Austria 8 5.021 1.108 0.439 0.163 0.840 0.283 0.643 1.095 0.641 -0.625 0.433
USA 7 5.162 1.109 1.268 -0.355 -0.271 1.544 1.048 -0.687 0.342 0.744 0.420
Germany 10 3.105 0.720 0.526 -0.708 1.166 0.928 -0.416 0.120 0.641 -0.319 0.446
Portugal 11 2.076 0.215 -0.187 -0.347 0.854 -0.860 0.422 0.902 0.342 0.390 0.345
France 12 1.340 0.160 0.410 -0.929 0.439 0.784 0.659 -0.509 -0.057 -0.083 0.466
Slovenia 13 -0.180 -0.406 -0.243 0.925 -0.865 -0.054 0.540 0.445 0.442 -0.930 -0.034
Czech Rep. 14 -1.060 -0.482 -0.714 1.148 -0.043 -0.309 -0.485 0.711 -0.856 -0.218 0.187
Hungary 15 -2.163 -0.202 -0.880 0.483 -1.029 -0.792 -0.331 0.295 0.442 0.085 -0.233
Italy 17 -3.141 0.244 -0.282 -0.797 0.477 -0.647 -0.499 -2.182 0.442 -0.255 0.358
Spain 16 -3.102 -0.273 0.199 -0.890 -0.072 -0.468 -0.298 -0.488 -0.257 -0.942 0.386
Greece 18 -5.399 -0.382 -0.117 -0.936 -0.527 -0.946 -1.409 -0.240 -0.157 -0.975 0.290
Slovakia 19 -5.670 -1.051 -1.060 1.306 -0.857 -0.717 -0.531 -1.323 -0.856 -0.593 0.012
Poland 20 -7.042 -0.674 -1.352 -0.707 -1.212 -0.828 0.107 -0.616 -1.255 -0.405 -0.099
Bulgaria 21 -10.372 -1.355 -1.197 0.611 -1.284 -0.319 -1.427 -1.470 -1.913 -0.500 -1.517
Romania 22 -12.063 -1.670 -1.653 -0.504 -1.438 -1.025 -1.388 0.482 -1.913 -0.763 -2.191
Russia 23 - 13,375 - 2,643 - 1,610 - 0,711 - 1,411 - 0,574 - 0,974 - 0,582 - 1,913 - 0,907 - 2,049 Source: based on Van Ark and Piatkowski (2004). Russia based on own estimates.