Contribution of information and communication technology to total factor productivity and externalities effects

Abstract

In this article, the authors attempt to find out what roles the digital divide plays in the dynamics of the growth gap among countries by looking at the relationship between ICT investment and the evolution of total factor productivity in 38 countries. The empirical results show that the digital divide, on one hand, widens the growth gap between countries. On the other hand, the global ICT diffusion generates ICT externalities, which have positive effects on the total factor productivity of less-developed countries. Therefore, the global digitalization may have both negative impacts, manifested in a widening digital divide and growth gap, and positive impacts reflected in the effects of knowledge spillovers. © 2005 Wiley Periodicals, Inc.