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IT and productivity: A firm level analysis

Author

Listed:
  • Emannuel Dhyne

    (Economics and Research Department, National Bank of Belgium)

  • Joep Konings

    (KU Leuven, VIVES; University of Liverpool Management School and CEPR)

  • Joep Konings

    (KU Leuven, VIVES)

  • Stijn Vanormelingen,

    (KU Leuven, Campus Brussels)

Abstract

Using a novel comprehensive data set of IT investment at the firm level, we find that a firm investing an additional euro in IT increases value added by 1 euro and 38 cents on average. This marginal product of IT investment increases with firm size and varies across sectors. IT explains about 10% of productivity dispersion across firms. While we find substantial returns of IT at the firm level, such returns are much lower at the aggregate level. This is due to underinvestment in IT (IT capital deepening is low) and misallocation of IT investments.

Suggested Citation

  • Emannuel Dhyne & Joep Konings & Joep Konings & Stijn Vanormelingen,, 2018. "IT and productivity: A firm level analysis," Working Paper Research 346, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:201810-346
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    3. Gilbert Cette & Sandra Nevoux & Loriane Py, 2022. "The impact of ICTs and digitalization on productivity and labor share: evidence from French firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 31(8), pages 669-692, November.
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    5. Simon Bruhn & Johanna Deperi, 2022. "The Contribution of Digital Firms to Productivity Growth in the Manufacturing Sector: A Decomposition Approach," GREDEG Working Papers 2022-42, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    6. J. De Mulder & H. Godefroid, 2018. "Slowdown in productivity," Economic Review, National Bank of Belgium, issue iv, pages 51-66, december.
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    More about this item

    Keywords

    Information technology; total factor productivty;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

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