Swedish Lessons: How Important are ICT and R&D to Economic Growth?

30 Pages Posted: 9 Jun 2015 Last revised: 4 Jul 2015

See all articles by Harald Olof Edquist

Harald Olof Edquist

Ericsson Research

Magnus Henrekson

Research Institute of Industrial Economics (IFN)

Date Written: July 1, 2015

Abstract

Since the mid-1990s value added has grown faster in the Swedish business sector than in most other OECD countries. We investigate the association between information and communications technology (ICT) and research and development (R&D) capital and value added in the Swedish non-farm business sector. By estimating neoclassical production function models on data for 47 different industries for the period 1993–2012 we show that ICT and R&D capital are significantly associated with value added for most specifications. When controlling for economic shocks the results show that on average, if ICT capital increases by 10 percent, value added increases by 1.8 percent. We also divide ICT capital into hardware and software capital. To our knowledge, this distinction has not been made in any previous study at the industry level. In this case only the estimated elasticity of software is significantly different from zero. One possible explanation could be that all industries invest in hardware, but only the ones that successfully invest in and implement software enjoy positive effects from ICT.

Keywords: ICT, R&D, Industrial change, Panel data

JEL Classification: O14, O32, O33, O47

Suggested Citation

Edquist, Harald Olof and Henrekson, Magnus, Swedish Lessons: How Important are ICT and R&D to Economic Growth? (July 1, 2015). IFN Working Paper No. 1073, Available at SSRN: https://ssrn.com/abstract=2615828

Harald Olof Edquist

Ericsson Research ( email )

Färögatan 6
Stockholm, Stockholm 16480
Sweden

Magnus Henrekson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
Grevgatan 34
Stockholm, SE-10215
Sweden
+46-8-6654502 (Phone)
+46-8-6654599 (Fax)

HOME PAGE: http://www.ifn.se/mh

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