In this chapter, we presented the current state of research on the contribution of ICT to pro-ductivity and economic growth. From a theoretical point of view, ICT aects propro-ductivity and growth directly and indirectly. Direct eects occur due to technological improvements in the ICT-producing sector and thus to the aggregated productivity of an economy proportional to the sector share. Due to capital deepening and as an enabler of products, processes and organiza-tional innovation, ICT also aects productivity indirectly in the ICT-using sectors. Some authors have examined whether ICT is a GPT. Although ICT seems to satisfy all the characteristics of a GPT, there are controversial positions in the literature.
The impact and contribution of ICT on productivity and economic growth is examined in the literature mainly by using two methods. These are the non-parametric growth accounting ap-proach and the parametric production function estimation. Growth accounting examines how much output growth of a country or industry can be explained by growth in the dierent types of capital input. It employs properties of production theory to determine empirical measures of the parameters of a production function by constructing economically dened index numbers.
By using the parametric approach of estimating a production function, output elasticies of input factors are directly estimated by statistical methods.
Both approaches have their advantages and disadvantages. Growth accounting provides a well-established and commonly used approach that allows for the quantication of the proximate sources of growth, but without accounting for the underlying causes. The growth accounting approach requires the consideration of ICT input in the form of capital, which can lead to biases in the case of incorrect measurement. The parametric approach avoids most of the neoclassical assumptions of the non-parametric growth accounting. Furthermore, it enables the estimated elasticities to be tested for their statistical signicance. However, the approach obliges its user to specify a functional form of a production function.
We reviewed the empirical literature on the contribution of ICT to productivity and economic growth on rm, industry and country level. Besides these aggregation levels, the studies also dier according to their denition of IT, communication and combined form of ICT as well as the applied empirical method. The role of ICT to productivity and economic growth has been investigated in an abundance of studies since the 1980s. The literature review reveals that the contribution of ICT to productivity and economic growth has been investigated primarily in the U.S. Studies from the 1980s and early 1990s show no or only low contribution of IT to productivity and economic growth. This changed considerably in the late 1990s, when the U.S. experienced a period of increasing productivity growth after two decades of productivity slowdown. The majority of researchers agree on the importance of ICT for the U.S. growth resurgence. A main reason for that is seen in the capital deepening since the mid-1990s, which was promoted by the massive price decline for IT/ICT equipment. This price decline triggered higher investment in ICT and substitution of less productive inputs in the ICT-using sectors.
Several authors investigated the eects of TFP growth in IT-producing industries and role of IT capital deepening in IT-using industries. The overall pattern of studies on industry level show a high contribution of IT investments to TFP growth, especially in the period from 1995-2000.
Further studies point to the role of IT in explaining productivity growth in the IT-using sectors.
They show that TFP growth has also increased in the ICT-using sector, especially in industries that use IT more intensively. This provides evidence for the hypothesis that I(C)T is a GPT.
A comparison of U.S. results with other countries reveals dierences in the impact of ICT on productivity and economic growth. A key result is that the EU could not benet to the same extent from the eects of ICT capital deepening and TFP growth in the ICT-producing sector as the U.S. Moreover, there are considerable dierences between EU countries. These dierences are also shown by studies comparing countries at dierent stages of development. While most post-1995 investigations show that ICT has a signicant positive impact on developed countries, some studies show that ICT has only a minor or no impact on developing countries.
While the economic impact of ICT has been widely explored in the U.S., cross-country studies covering a sucient number of countries at all stages of development are rare. The results of these studies are also contradictory and show that the ndings from the empirical literature for the U.S. do not necessarily apply to other countries. Furthermore, the reasons for the dierences between developing and developed countries in the impact of ICT on productivity and economic growth are still largely unexplored. Since there are only a few studies which include a sucient number of countries at all stages of development, this dissertation extends the current research eld with three scientic contributions on the country level.
3 Information and Communication Technology
This chapter addresses the denition and quantitative measurement of ICT. The chapter is di-vided into four sections. In section 3.1, we describe the terminology and denition of ICT. In section 3.2, we review the situation of available data for measuring ICT. We discuss the disadvan-tages of using capital stocks to describe ICT and motivate the usage of non-monetary penetration rates of ICT infrastructure as an appropriate proxy for ICT. Subsequently, we construct the ICT variable from the penetration rates. In section 3.3 we conduct a descriptive analysis of the constructed variable. Section 3.4 summarizes this chapter.
3.1 Terminology and Denition of ICT
The acronym ICT stands for `Information and Communication Technology', a phrase that has been used by academic researchers since the 1980s. Sometimes, ICT is used synonymously with IT (`information technology'). In contrast to IT, however, the acronym ICT additionally covers the area of communication and thus a broader, more comprehensive list of components related to connected computers and digital technologies.
A clear and unequivocal denition of what precisely ICT refers to cannot be found in the scientic literature. The available literature covers ICT in the technological, economic, occupational and cultural dimensions. The complexity of the ICT concept derives partly from the inuences of the terms `information age' (see for instance Castells 2011), `digital age' (also `digital revolution', see e.g. Brynjolfsson and McAfee 2012) and `information society' (see e.g. Webster 2014). In determining and dening ICT in the context of this dissertation, the scope is limited to the economic and technological aspects.
It can generally be assumed that the rst denition of information technology is that of Leavitt and Whisler from 1958, right at the beginning of the information age:
The new technology does not yet have a single established name. We shall call it information technology. It is composed of several related parts. One includes techni-ques for processing large amounts of information rapidly, and it is epitomized by the high-speed computer. A second part centers around the application of statistical and mathematical methods to decision-making problems; it is represented by techniques like mathematical programming, and by methodologies like operations research. A third part is in the ong, though its applications have not yet emerged very clearly;
it consists of the simulation of higher-order thinking through computer programs (Leavitt and Whisler 1958, p. 41).
Comparing the denition with the more modern denition of Davis and Hamilton from 1993, it can be argued that the denition from the 1950s is essentially still applicable today. In addition to the description of hardware and software, the aspect of telecommunications has been added:
Information technology refers broadly to the technology of computers and electronic communications as applied to processing, transfer, and storage of information. It
encompasses computer hardware, data communications, software, and a large variety of input and output devices. Local area and wide area communications network for information transfer are also included (Davis and Hamilton 1993, p. 21).
Many other denitions describe the concept of information technology in a similar way, including hardware and software components as well as communication technology. The common naming of information and communication technology does not seem to be absurd. These terms are also referred to as Siamese twins, meaning that information is inconceivable without communication and vice versa. ICT can be seen as an extended term for information technology (IT) which stresses the role of unied communications. According to Technopedia, an IT Dictionary for Computer Terms and Tech Denitions, ICT refers to all the technology used to handle telecom-munications, broadcast media, intelligent building management systems, audiovisual processing and transmission systems, and network-based control and monitoring functions.22 Thus, the term ICT does not merely describe an extension of the IT concept, but also refers to the con-vergence of telecommunications (telephone lines and wireless signals) with computer networks (including software used) using a single unied system of cabling or link system.
The Organization for Economic Co-operation and Development (OECD) has been striving since the mid-1990s to establish and enforce an internationally standardized and accepted denition of the ICT sector. Rather than classifying ICT-related products, the OECD initially denes ICT-related sectors and industries on the basis of the international standard classication of activities (ISIC). A rst delimitation of ICT was dened in 1998 by the WPIIS23(Working Party of Indicators for the Information Society) on the basis of the ISIC classication and published in 2000 (OECD 2000). From the perspective of the OECD, ICT refers to the combination of manufacturing and services industries that capture, transmit and display data and information electronically (OECD 2002).
Since 2002, the OECD has reconvened discussions regarding the sectoral denition of ICT and has clearly delineated manufacturing from services industries. The current delimitation from 2006 is based on the ISIC classication Rev. 4 and categorizes the ICT industry into the subdivisions of manufacturing, trade and services industries.24 In addition to ICT, a delimitation of a content and media sector was published in 2007, which contains industries that are concerned with the production, publication and/or electronic distribution of media content.25
In 2003, the OECD also developed a classication of ICT goods that was complemented by a classication of ICT services in late 2007 as well as content and media products in 2008. The
22 https://www.techopedia.com/denition/24152/information-and-communications-technology-ict.
23 This is an OECD working group that was set up in 1997 under the newly established ICCP (Information, Computer and Communications Policy) statistical panel.
24 The current sectoral denition of ICT from the OECD, based on the ISIC classication Rev. 4, is given in table B1 of the appendix.
25 The OECD denes media content as follows: Content corresponds to an organized message intended for human beings published in mass communication media and related media activities. The value of such a product to the consumer does not lie in its tangible qualities but in its information, educational, cultural or entertainment content (OECD 2009). This content and media sector includes products such as printed or otherwise transported media, moving images, television or radio content, software games or music (OECD 2009). In the revision of 2008, the content and media sector was grouped together with the ICT sector under the term information economy.
classication uses the Central Product Classication (CPC) code of the UN. In the latest version, the classication of ICT goods, services and media products are combined in an information economy product classication that was released by the WPIIS in 2010. For the detailed sectoral and product denitions we refer to the recent publication in OECD (2011).
The elaborate denition of the ICT sector, products and services by the OECD is seldom used outside the ocial statistics. Actually, most of the scientic works concerning ICT in the eco-nomic sense do not provide a clear and unambiguous specication of that term. It appears to be assumed that the denition and delimitation of ICT is obvious and does not need to be dened explicitly. Accordingly, the subjects of research dier widely in the economic and scien-tic literature. For example, Oliner and Sichel (2002) use the sum of nal computer hardware, communication equipment and software sales as well as the sales in the semiconductor sector (from various, partly unpublished sources) to reect the ICT. Jorgenson and Timmer (2011), by contrast, utilize the aggregated output of companies that belong to the ICT sector.26 These also include manufacture of televisions and postal services, and are surveyed by national statistics oces in the EU. Brynjolson et al. (2002) consider the investment in computers as a proxy of IT. Other proxies are e.g. the number of internet hosts (Guillén and Suárez 2001, Kiiski and Pohjola 2002), the number of personal computers (Chinn and Fairlie 2007) or the internet diusion rates (Wunnava and Leiter 2009).27
In summary, we can conclude that a concrete and unambiguous denition of ICT does not exist. The establishment of a consistent and universal denition seems dicult. The example of the OECD shows that it is challenging to dene ICT as a list of components. A list of ICT components is exhaustive, and it continues to grow over time. While computers and telephones have existed for decades, other components such as smartphones or e-commerce have only been prevalent for a few years or will only be released in the years ahead, such as nanotechnology. ICT continues to insinuate and alter itself in the ever-changing globe. For this reason, a denition of ICT in the form of an abstract concept seems to be more appropriate.
In an abstract form, ICT can be described as a diverse set of technologies and resources used to communicate, create, disseminate, store and manage information. These technologies have the characteristic that they provide access to information through telecommunications. The plumbing analogy of Davenport and Prussak (2000) can be used for better understanding: In a plumbing system of pipes and storage tanks, water is stored in the storage tanks and ows through the pipes. In this analogy, information technology is represented by the storage tanks and communication technology by the pipes. Using information technology, information (stored, non-owing water) is communicated (owing water) though communication technology.
26 The sectoral denition is based on the Statistical Classication of Economic Activities in the European Com-munity, Rev. 1.1 (2002) (NACE Rev. 1.1) and includes codes 30-33 and 64, which are `Manufacture of oce machinery and computers', `Manufacture of electrical machinery and apparatus n.e.c.', `Manufacture of ra-dio, television and communication equipment and apparatus', `Manufacture of medical, precision and optical instruments, watches and clocks, Post and telecommunications'.
27 The various indicators and proxies used to describe ICT will be outlined in detail at a later stage in section 3.2.