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

Author

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  • Bart van ARK

    (The Conference Board, New York, University of Groningen)

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.

Suggested Citation

  • Bart van ARK, 2015. "Productivity and Digitilization in Europe: Paving the Road to Faster Growth," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(100), pages 107-124, 4th quart.
    • Handle: RePEc:idt:journl:cs10005
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    References listed on IDEAS

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    1. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 339-376.
    2. Sandra E. Black & Lisa M. Lynch, 2001. "How To Compete: The Impact Of Workplace Practices And Information Technology On Productivity," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 434-445, August.
    3. Eric J. Bartelsman, 2013. "ICT, Reallocation and Productivity," European Economy - Economic Papers 2008 - 2015 486, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Crafts, Nicholas, 2010. "The contribution of new technology to economic growth: lessons from economic history," Revista de Historia Económica / Journal of Iberian and Latin American Economic History, Cambridge University Press, vol. 28(3), pages 409-440, December.
    5. Carol Corrado & Jonathan Haskel & Cecilia Jona-Lasinio & Massimiliano Iommi, 2013. "Innovation and intangible investment in Europe, Japan, and the United States," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 29(2), pages 261-286, SUMMER.
    6. Robert J. Gordon, 2013. "U.S. Productivity Growth: The Slowdown Has Returned After a Temporary Revival," International Productivity Monitor, Centre for the Study of Living Standards, vol. 25, pages 13-19, Spring.
    7. Haskel, J & Corrado, C & Jona-Lasinio, C & Iommi, M, 2013. "Innovation and intangible investment in Europe, Japan and the US," Working Papers 11139, Imperial College, London, Imperial College Business School.
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    Citations

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    Cited by:

    1. Gert Bijnens & Jozef Konings, 2020. "Declining business dynamism in Belgium," Small Business Economics, Springer, vol. 54(4), pages 1201-1239, April.
    2. Peter Bauer & Igor Fedotenkov & Aurelien Genty & Issam Hallak & Peter Harasztosi & David Martinez Turegano & David Nguyen & Nadir Preziosi & Ana Rincon-Aznar & Miguel Sanchez Martinez, 2020. "Productivity in Europe: Trends and drivers in a service-based economy," JRC Research Reports JRC119785, Joint Research Centre.
    3. Alexander Salmen, 2021. "New Product Launch Success: A Literature Review," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 69(1), pages 151-176.
    4. Konings, Jozef & Bijnens, Gert, 2018. "Declining Business Dynamism," CEPR Discussion Papers 12615, C.E.P.R. Discussion Papers.
    5. Gruber, Harald, 2019. "Proposals for a digital industrial policy for Europe," Telecommunications Policy, Elsevier, vol. 43(2), pages 116-127.
    6. Reinhilde Veugelers, 2019. "Trends at the Frontier in Corporate R&D in the Digital Era: Facts, Prospects and Policies," European Economy - Discussion Papers 120, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. Bäck, Asta & Hajikhani, Arash & Jäger, Angela & Schubert, Torben & Suominen, Arho, 2022. "Return of the Solow-paradox in AI? AI-adoption and firm productivity," Papers in Innovation Studies 2022/1, Lund University, CIRCLE - Centre for Innovation Research.
    8. Rehman, Naqeeb Ur & Nunziante, Giulia, 2023. "The effect of the digital economy on total factor productivity in European regions," Telecommunications Policy, Elsevier, vol. 47(10).

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    More about this item

    Keywords

    information and communication technology; productivity; economic growth; economic policy; Europe.;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment

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