Productivity and Digitilization in Europe: Paving the Road to Faster Growth

DIGIWORLD ECONOMIC JOURNAL, no. 100, 4th quarter. 2015, p. 107

18 Pages Posted: 30 Sep 2016

See all articles by Bart van Ark

Bart van Ark

University of Groningen - Department of Economics; Alliance Manchester Business School

Date Written: November 16, 2015

Abstract

This paper reviews the latest evidence on the contribution of Information and Communication Technology (ICT) – and the digital economy more broadly – on economic growth for Europe and the United States since the late 1990s until most recently. The paper provides estimates on the contributions from ICT to growth from three channels affecting the long-term growth performance of entire economies: 1) a productivity effect through the ICT-producing sector, 2) an investment effect from ICT-using industries through capital deepening, and 3) a productivity effect from an efficiency rise through the use of ICT which goes beyond the direct capital deepening effect. The study finds that the slowing of the total factor productivity growth rate in Europe reflects a failure to effectively adopt new technologies and innovation. It is also argued that the lack of rapid accumulation of intangible capital (such as information assets, innovative property, and economic competencies) constrains Europe's ability to accelerate and facilitate the innovation effects from digital technology. Finally, we discuss some policy implication emerging from our work, in particular the need to complete the Single Market in Europe to improve the productivity effects from the digital economy.

Keywords: information and communication technology, productivity, economic growth, economic policy, Europe

JEL Classification: D24, O47, O33, O52, L63

Suggested Citation

van Ark, Bart, Productivity and Digitilization in Europe: Paving the Road to Faster Growth (November 16, 2015). DIGIWORLD ECONOMIC JOURNAL, no. 100, 4th quarter. 2015, p. 107, Available at SSRN: https://ssrn.com/abstract=2845368

Bart Van Ark (Contact Author)

University of Groningen - Department of Economics ( email )

Economics
9700 AH Groningen
Netherlands

Alliance Manchester Business School ( email )

Oxford Road
Manchester, N/A M13 9PL
United Kingdom

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