Information Technology as a Catalyst to the Effects of Education on Labor Productivity

21 Pages Posted: 30 Sep 2020

See all articles by John Paul Flaminiano

John Paul Flaminiano

Asian Institute of Management Policy Center

Jamil Paolo Francisco

Asian Institute of Management

Sunshine Alcantara

Asian Institute of Management Policy Center

Date Written: August 14, 2020

Abstract

The age structure of the population in most countries has been changing rapidly, and many countries are becoming knowledge-based economies where the generation and use of information as a critical input to value creation are becoming increasingly important. While a decline in the dependency ratio provides a window of opportunity for many young economies, we show evidence in support of the position that relying entirely on changes in population structure may not be sufficient to increase productivity, especially as national economies become increasingly knowledge-based. Using fixed-effects panel regression on data from 121 countries for the period 1990 to 2017, we estimated log values of labor productivity with respect to log values of capital per worker, labor force size, population size, education, and internet use. We found education and internet use both having a positive relationship with labor productivity. We also found significant positive interaction effects between education and internet use. This suggests that information technology, as represented by internet use, enhances the positive impact of human capital, particularly education, on labor productivity. Thus, policies that are geared towards improving labor productivity should consider the complementary relationship between information technology and human capital. Concurrently improving human capital and the use of information technology is essential to maximize productivity gains and harness the demographic dividend, especially for countries transitioning to knowledge-based economies.

Keywords: Labor Productivity, Knowledge-Based Economy, Demographic Dividends, ICT, Human Capital, Education

JEL Classification: E24, J18, I26, O14

Suggested Citation

Flaminiano, John Paul and Francisco, Jamil Paolo and Alcantara, Sunshine Therese, Information Technology as a Catalyst to the Effects of Education on Labor Productivity (August 14, 2020). Available at SSRN: https://ssrn.com/abstract=3673758 or http://dx.doi.org/10.2139/ssrn.3673758

John Paul Flaminiano (Contact Author)

Asian Institute of Management Policy Center ( email )

123 Paseo de Roxas
Makati City, Metro Manila
Philippines

Jamil Paolo Francisco

Asian Institute of Management ( email )

123 Paseo de Roxas
Makati City, Metro Manila
Philippines

Sunshine Therese Alcantara

Asian Institute of Management Policy Center ( email )

3/F, Asian Institute of Management
Eugenio Lopez Foundation Bldg., 123 Paseo de Roxas
Makati City, Metro Manila 1103
Philippines

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