The economic impact of information and communication technology (ICT) investment in EU-27

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Title: The economic impact of information and communication technology (ICT) investment in EU-27
Author: Kharitonova, Liubov
Other contributor: Helsingin yliopisto, Valtiotieteellinen tiedekunta, Politiikan ja talouden tutkimuksen laitos
University of Helsinki, Faculty of Social Sciences, Department of Political and Economic Studies
Helsingfors universitet, Statsvetenskapliga fakulteten, Institutionen för politik och ekonomi
Publisher: Helsingfors universitet
Date: 2013
Language: eng
Thesis level: master's thesis
Discipline: Economics
Abstract: The empirical analysis of the impact of information and communications technology investments is an active field with continuing developments to try to better capture the practice of technology implementation. The research on ICT payoffs is complex. Many empirical studies performed by economists, management scientists and information field researches come to conflicting conclusions on whether ICT investment has positive correlation with productivity and economic growth. The purpose of this study is to provide additional descriptive information by conducting empirical research with measurement of the economic growth model and analysis of the relevant data. This study examines ICT investment impact on economic growth in a cross-section of EU-27 during 11 years starting from 1996 until 2007. The empirical study is based on an explicit model of economic growth, which has recently been applied in a number of studies exploring economic growth impacts of various components of capital. The work applies augmented version of Solow growth model, which includes accumulation of human capital and information technology capital as well as physical capital. The research is enforced by the analysis of the economy development in EU-27 during the last two decades, changes in labour market and organizational restructuring resulting from ICT investment. The study confirms that the use of ICT is only part of a much broader range of changes, such as labour market and organizational changes that help firms to enhance performance. The analysis shows that the recent technological change has been skill biased, enforcing inequality in wages and employment opportunities among people with different educational levels and shift in occupations. The investigation demonstrates the readiness of European companies to perform organizational changes as they see it to be a key source to competitiveness. The empirical analysis shows that information and communication technologies play a significant role in the recent economic growth of countries that invest sufficient amount in research and development activities, but it does not seem yet to have made a substantial contribution in all European Union 27 countries. The result is supported by the view that those 10 countries have build up a mature stock of physical infrastructure and human capital, which enhance and amplify the effects of investments in information and communication technology. The main results of the study are that physical capital is still a key factor of economic growth in the whole EU-27 country set; neither human capital nor ICT seems to have a significant impact on GDP growth during 1996-2007 in the whole EU-27 country set; improvements in measurement of inputs and outputs would definitely improve the result. The study points out areas for future research.
Subject: economic growth
ICT investments
organizational change

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