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ICT and Growth: The Role of Rates of Return and Capital Prices
Author(s) -
Niebel Thomas,
Saam Marianne
Publication year - 2016
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12168
Subject(s) - economics , productivity , information and communications technology , investment (military) , growth accounting , capital (architecture) , asset (computer security) , monetary economics , total factor productivity , quality (philosophy) , macroeconomics , philosophy , computer security , epistemology , history , archaeology , politics , political science , computer science , law
We revisit the widely discussed contribution of investment in ICT to economic growth, focusing on differences in productivity and quality of ICT across countries and time. In a growth accounting approach, we look at the way rates of return and rates of asset price decline measure these aspects. Conducting a sensitivity analysis with data from the EU KLEMS database for the years 1990–2007, we introduce a constant rate of return and a constant rate of ICT price decline. Both alternative measurements somewhat downplay the role investment played relative to growth in multifactor productivity in the U . K . and the U . S . during 1995–2000. Moreover, we show that more than half of the ICT contribution to labor productivity growth results from changes in capital quality and composition rather than from quantity.