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Does ICT Investment Matter for Growth and Labor Productivity in Transition Economies?

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  • Marcin Piatkowski

Abstract

Following up on a previous paper by the same author on the contribution of ICT capital to growth and labor productivity in Poland 1995-2000, this paper extends the study to eight transition economies: Bulgaria, Czech Republic, Hungary, Poland, Russia, Slovakia and Slovenia. The paper shows that the contribution of investment in IT hardware, software and telecommunication equipment to output growth and labor productivity between 1995 and 2000 in most countries featured in the study was much higher than what might be expected on the basis of the level of their GDP per capita. This may suggest that the transition economies – through the use of ICT - are benefiting from the technological leapfrogging to increase the growth rates in output and labor productivity and hence accelerate the process of catching-up. The relatively large contribution of ICT capital to output growth and labor productivity is due to an extraordinary acceleration in real ICT investments, which were growing between 1995 and 2000 at an average rate of more than 20% a year for almost all countries in the study. Large investments in ICT seem to have been induced by (i) falling prices of ICT products and services, which encouraged companies to substitute ICT for non-ICT capital and (ii) an opportunity for higher-than-normal returns on ICT investments due to a large pent-up demand for ICT infrastructure, a legacy of decapitalization and technological gap existing before 1989.

Suggested Citation

  • Marcin Piatkowski, 2004. "Does ICT Investment Matter for Growth and Labor Productivity in Transition Economies?," Development and Comp Systems 0402008, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpdc:0402008
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    References listed on IDEAS

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    Cited by:

    1. Hubert Gabrisch, 2020. "The productivity puzzle and the Kaldor-Verdoorn law: the case of Central and Eastern Europe," NBP Working Papers 318, Narodowy Bank Polski.
    2. Bart van Ark & Marcin Piatkowski, 2004. "Productivity, innovation and ICT in Old and New Europe," International Economics and Economic Policy, Springer, vol. 1(2), pages 215-246, January.
    3. Jakub Fischer & Kristýna Vltavská & Petr Doucek & Jana Hančlová, 2013. "Vliv informačních a komunikačních technologií na produktivitu práce a souhrnnou produktivitu faktorů v České republice [The Influence of Information and Communication Technologies on Labour Product," Politická ekonomie, Prague University of Economics and Business, vol. 2013(5), pages 653-674.
    4. Samoilenko, Sergey & Osei-Bryson, Kweku-Muata, 2008. "An exploration of the effects of the interaction between ICT and labor force on economic growth in transition economies," International Journal of Production Economics, Elsevier, vol. 115(2), pages 471-481, October.
    5. Hubert Gabrisch, 2021. "The long-run properties of the Kaldor–Verdoorn law: a bounds test approach to a panel of Central and East European (CEE) countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(1), pages 101-121, February.
    6. Piatkowski, Marcin, 2004. "The Impact of ICT on Growth in Transition Economies," MPRA Paper 29399, University Library of Munich, Germany.
    7. Dana Hajkova, 2008. "The Measurement of Capital Services in the Czech Republic," Working Papers 2008/11, Czech National Bank.

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    More about this item

    Keywords

    economic growth; post-communist countries; information technology; growth accounting;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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