ICT and Growth: The Role of Rates of Return and Capital Prices

28 Pages Posted: 26 May 2016

See all articles by Thomas Niebel

Thomas Niebel

ZEW – Leibniz Centre for European Economic Research

Marianne Saam

ZEW – Leibniz Centre for European Economic Research - Information and Communication Technologies Research Group

Date Written: June 2016

Abstract

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.

Keywords: asset prices, growth accounting, ICT capital, rates of return

JEL Classification: C43, E22, O47

Suggested Citation

Niebel, Thomas and Saam, Marianne, ICT and Growth: The Role of Rates of Return and Capital Prices (June 2016). Review of Income and Wealth, Vol. 62, Issue 2, pp. 283-310, 2016, Available at SSRN: https://ssrn.com/abstract=2784064 or http://dx.doi.org/10.1111/roiw.12168

Thomas Niebel (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Marianne Saam

ZEW – Leibniz Centre for European Economic Research - Information and Communication Technologies Research Group ( email )

D-68034 Mannheim
Germany

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