The Contribution of ICT Investment to Economic Growth and Labor Productivity in Poland 1995-2000

Abstract

There is large evidence on a positive impact of information and communication technologies (ICT) on economic growth and productivity in a number of developed countries in the 1990's. There are however no studies, which would estimate the contribution of ICT to growth and productivity in post-communist, transition economies. Data availability, consistency, and trustworthiness have been so far the main obstacles. This paper makes a first attempt, based on an extended growth accounting framework, at estimating the contribution of investment in ICT to output growth and labor productivity in Poland, the largest post-communist economy in Central and Eastern Europe and a prospective member of the EU (2004). The paper discusses the challenges of using available data and its impact on the choice of specific methodologies. The paper shows that ICT investment contributed on average 0.47 of a percentage point or 8.9% of GDP growth and 12.7% or 0.65 of a percentage point contribution to labor productivity between 1995-2000. This relatively large impact of ICT capital is due to an extraordinary acceleration in ICT investments between 1993-2001 induced by - on the one hand - rapidly falling prices of ICT products and services and - on the other hand - large demand for ICT fueled by high economic growth in the 1990's and substantial pent-up demand due to infrastructural underinvestment in ICT.

Keywords: economic growth, growth accounting, information technology, post-communist countries

JEL Classification: O3, O4, O5