The Return on Information Technology: Who Benefits Most?

50 Pages Posted: 22 Oct 2018

See all articles by Emmanuel Dhyne

Emmanuel Dhyne

National Bank of Belgium

Jozef Konings

University of Liverpool

Jeroen Van den bosch

KU Leuven

Stijn Vanormelingen

KU Leuven

Date Written: October 2018

Abstract

Using a novel comprehensive data set of IT investment at the firm level, we find that a firm investing an additional euro in IT increases value added by 1 euro and 38 cents on average. This marginal product of IT investment increases with firm size and varies across sectors. IT explains about 10% of productivity dispersion across firms. While we find substantial returns of IT at the firm level, such returns are much lower at the aggregate level. This is due to underinvestment in IT (IT capital deepening is low) and misallocation of IT investments.

Keywords: IT, Productivity Growth

JEL Classification: D24, L10, O14, O49

Suggested Citation

Dhyne, Emmanuel and Konings, Jozef and Van den bosch, Jeroen and Vanormelingen, Stijn, The Return on Information Technology: Who Benefits Most? (October 2018). CEPR Discussion Paper No. DP13246. Available at SSRN: https://ssrn.com/abstract=3270922

Emmanuel Dhyne (Contact Author)

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Jozef Konings

University of Liverpool ( email )

Chatham Street
Liverpool, L69 7ZA
United Kingdom

Jeroen Van den bosch

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Stijn Vanormelingen

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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