Information Technology as a Factor of Economic Development: Evidence from Developed and Developing Countries

Abstract

This article explores the role of information and communication technologies (ICT) and of its individual components as factors of economic development. An augmented production function is employed to estimate the total ICT effect on labor productivity growth as well as the impact exerted by its components (hardware, software, and communications). The empirical analysis is based on a sample of 42 developed and developing countries, covering the 1993–2001 period. A positive and significant ICT growth effect is estimated in both country samples, with the highest impact observed in developed ones. This effect stems entirely from the hardware and communication components. Estimates concerning the individual components of ICT slightly differentiate between developed and developing countries, with respect to their statistical significance. The results are robust to possible endogeneity biases.