The contribution of information and communication technologies investment on economic growth

Abstract

Growth accounting method to measure the contribution of Information and Communication Technologies (ICT) investment on economic growth has widespread in 1990s in the United States and then in many other developed countries including Europe, G7. This study extends growth accounting exercise in a large sample of 32 countries in recent period from 2005 to 2010. Results from this study prove that ICT capital investment is a very important factor. Although its contribution is not largely as non-ICT capital, its share in economic growth is not small and positive in all countries including developed and developing groups. Even in the period after financial crisis in year 2008, ICT investment is recognized a positive contribution to economic growth in all economies in sample. Such country-by-country results, however, “are not sufficient to judge how significant ICT has impacted output growth across economies” as Vu (2005) mentioned. Therefore, in my research, I continue to analyze the main channels through which ICT investment influences the economic growth and evaluate its impacts on each channels. By applying regression analysis, this study finds a robust and positive statistically significant between ICT capital on output growth and on TFP growth through spillovers effects in the full sample of 32 countries, especially in developing economies group. For developed economies, the empirical evidence of ICT impact on output growth is smaller and even not statistically significant impact on TFP growth through spillovers. Finally, an empirical regression model is build in order to find out determinants of variation on the contribution of ICT investment on economic growth in this research. Regression results show that education, openness, inward FDI, health and English fluency are the most significant and positively impact although institutional quality is not statistically significant in period before 2008. However, those impacts from these variables are smaller in later period of post-2008.