Digitalisation and Productivity: Gamechanger or Sideshow?

49 Pages Posted: 9 Mar 2023

See all articles by Robert Anderton

Robert Anderton

European Central Bank (ECB)

Paul Reimers

Goethe University Frankfurt - Department of Money and Macroeconomics; Deutsche Bundesbank

Vasco Botelho

European Central Bank

Date Written: March, 2023

Abstract

Is digitalisation a massive gamechanger which will deliver huge gains in productivity, or is it more of a sideshow with only limited impacts? We use a large balance sheet panel dataset comprising more than 19 million European firm-level observations to empirically investigate the impact of digitalisation on productivity growth via various previously unexplored chan-nels and mechanisms. Our results suggest that for two otherwise identical firms, the firm that exhibits on average a higher share of investment in digital technologies will exhibit a faster rate of TFP growth, but not all firms and sectors experience significant productivity gains from digitalisation. Digitalisation does not seem to have relatively stronger impacts on the productivity of frontier firms compared to laggards, nor does it help to turn laggards into frontier firms. Overall, firms should not regard digital investment as a ‘one-size-fits-all’ strategy to improve their productivity. Digital technologies are a gamechanger for some firms. But they seem more like a sideshow for most firms, who attempt to be increasingly digital but are not able to adequately reap its productivity gains.

Keywords: digital technology/transition, productivity growth, technology adoption/diffusion

JEL Classification: D22, D24, D25, O33

Suggested Citation

Anderton, Robert and Reimers, Paul and Botelho, Vasco, Digitalisation and Productivity: Gamechanger or Sideshow? (March, 2023). ECB Working Paper No. 2023/2794, Available at SSRN: https://ssrn.com/abstract=4382563 or http://dx.doi.org/10.2139/ssrn.4382563

Robert Anderton (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Paul Reimers

Goethe University Frankfurt - Department of Money and Macroeconomics ( email )

Germany

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
60431 Frankfurt am Main
Germany

Vasco Botelho

European Central Bank ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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