Management Science · 2000 · 892 citations · 27 references
Social SciencesEconomicsInformation TechnologyDevelopment EconomicsEconometricsInternational EconomicsEconomic GrowthInvestmentInvestment PolicyPanel Data AnalysisPanel Data MethodsProductivity AnalysisAggregate Production FunctionCapital Investment AnalysisEstimation Of Production FunctionsPanel Data EstimationPanel Data Production FunctionsPanel Data RegressionProduction Function EstimationProductivity Effects Of Technology
The study investigates how returns from IT investments drive demand for global IT products and services. An intercountry production function using panel data from 36 countries (1985–1993) links IT and non‑IT inputs to GDP output. Developed countries exhibit significant positive returns from IT capital, whereas developing countries show substantial returns from non‑IT capital and negligible IT returns, implying differing policy priorities for capital investment.
This paper studies a key driver of the demand for the products and services of the global IT industry—returns from IT investments. We estimate an intercountry production function relating IT and non-IT inputs to GDP output, on panel data from 36 countries over the 1985–1993 period. We find significant differences between developed and developing countries with respect to their structure of returns from capital investments. For the developed countries in the sample, returns from IT capital investments are estimated to be positive and significant, while returns from non-IT capital investments are not commensurate with relative factor shares. The situation is reversed for the developing countries subsample, where returns from non-IT capital are quite substantial, but those from IT capital investments are not statistically significant. We estimate output growth contributions of IT and non-IT capital and discuss the contrasting policy implications for capital investment by developed and developing economies.
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