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How ICT Investment and Energy Use Influence the Productivity of Korean Industries?

Author

Listed:
  • Khayyat, Nabaz T.

    (College of Engineering, Seoul National University)

  • Lee, Jongsu

    (College of Engineering, Seoul National University)

  • Heshmati, Almas

    (Centre of Excellence for Science and Innovation Studies (CESIS) & Sogang University)

Abstract

This empirical study examines changes in industrial productivity in Korea between 1980 and 2009, focusing on how investment in information and communication technology (ICT) and energy use, influence productivity levels. A dynamic factor demand model is applied in order to link inter-temporal production decisions by explicitly recognizing that the level of certain factors of production cannot be changed without incurring so-called adjustment costs, defined in terms of forgone output from current production. In particular, we investigate how the ICT–energy relationship affects total factor productivity growth in 30 industrial sectors. Describing industry-specific productivity levels is important for policymakers when the allocation of public investment and support is limited. The results presented herein show that ICT/non-ICT capital investment are substitutes for labor and energy use. We also find a high output growth rate in the sampled sectors, and increasing returns to scale, whose effects on the TFP component are higher than those of technological progress.

Suggested Citation

  • Khayyat, Nabaz T. & Lee, Jongsu & Heshmati, Almas, 2014. "How ICT Investment and Energy Use Influence the Productivity of Korean Industries?," Working Paper Series in Economics and Institutions of Innovation 358, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    • Handle: RePEc:hhs:cesisp:0358
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Dynamic factor demand; Panel data; ICT investment; Energy use; Productivity;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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