Ifo Institute for Economic Research at the University of Munich
ICT, Skills and Productivity Growth
US-German High-Skill and ICT Investments
Complementarities
Thomas Strobel
2009 North American Summer Meeting
of the Econometric Society
Boston University, June 4–7 2009
Ifo Institute for Economic Research at the University of Munich
Motivation, I
• US-German Comparisons in Labor Productivity Growth
Period:
Germany: US:US:
Period:
Germany:
1992–1995: 2.38
2.38% 1.53 1.53%
1992–1995:
1996–2000:
1.99% 2.56 2.56%
1996–2000:
1.99
2001–2005:
2001–2005: 1.28
1.28% 2.96 2.96%
3.80%
2.80%
1.80%
0.80%
-0.20%
Period Average Growth USA
Annual Growth USA
2005
Annual Growth Germany
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
Period Average Growth Germany
Notes: Annual value added per hours worked. Sources: US is Nonfarm Business Sector (US Bureau of Labor
Statistics, 2009), Germany is Total Economy (German Federal Statistical Office, 2009) and authors’ calculations.
Ifo Institute for Economic Research at the University of Munich
Motivation, II
• US: 2 Productivity Surges
– 1. surge post 1995: consensus related to Information and
Communication Technology (ICT)
 ICT-Production and ICT-Using (spillover) TFP growth (Jorgenson &
Stiroh (2000); Oliner & Sichel (2000); Oliner, Sichel & Stiroh (2007)
– 2. surge post 2000: broader based
 Strong contributions from ICT-Using and market services (Stiroh,
2006, Triplett & Bosworth, 2004)
• Germany: Dual Decline
– Much weaker ICT effects
– ICT effects unable to offset the reduction in Non-ICT industries
productivity growth (Eicher & Roehn, 2007, Eicher & Strobel, 2008,
2009)
Ifo Institute for Economic Research at the University of Munich
Motivation, III
• What if we look at the interaction of ICT and skills? What
can we learn about German and US industry performance,
and productivity contributions?
– Capital-skill complementarity (Griliches, 1969)
– Empirical evidence for an ICT capital-skill complementarity
(e.g. OECD Information Technology Report 2004, 2006; on the firm
level: Bresnahan, Brynjolfsson & Hitt, 1995, and Murnane, Levy &
Autor, 1999)
– Skill-biased technological change
(e.g. Acemoglu, 1998, 2002; Aghion, 2002; Hornstein, Krusell and
Violante, 2005)
Ifo Institute for Economic Research at the University of Munich
Industry Classification, I
• Focus: High-skill intensity of industries
– High-skill intensity measured by share of high-skilled hours worked in
total hours worked
– Industry classification: High-skill-intensive are those industries whose
share in high-skilled hours worked exceeds the economy-wide
median.
– Skill data for Germany and US provided by EUKLEMS Growth and
Productivity Accounts (Timmer et al., 2007a, b)
• Separation into high-, medium- and low-skilled workers
• High-skilled workers are above bachelor degrees. For US-German
comparisons bachelor degrees are assumed to represent similar skill
levels (Timmer et al., 2007a, b).
• Availability of data for 11 industries, where higher aggregates are
imputed at lower sectoral levels of aggregation
Ifo Institute for Economic Research at the University of Munich
Data: Growth Accounting Databases
• Data and Sources
Ifo Industry Growth Accounting Database
(IIGAD)
EU KLEMS Productivity and Growth Accounts
(EUKLEMS)
Germany
USA
• WZ2003 Classification (1991–2005)
• US-SIC based on SIC KLEMS data for 1970–2000
extrapolated forward to 2005 using NAICS
• Capital Accounts: Ifo Investment Database, Ifo studies
and surveys
• Capital Accounts: Jorgenson, Ho and Stiroh, 2005, and
BEA investments mapped to JHS
– 3 ICT assets:
• Software investments
• Communication equipment
• Computers and Office equipment
– 9 Non-ICT assets
– ICT price adjustments: Groningen, ICT price deflators
(based on BEA)
• Labor Accounts: German Federal Statistical Office,
Income Survey, Social Security Data, Socio-Economic
Panel
– Hours worked (employed and self-employed)
– Hours skill formation (high, medium, low skilled)
–3 ICT assets:
• Software investments
• Communication equipment
• Computers equipment
– 5 Non-ICT assets
– BEA ICT prices deflators
• Labor Accounts: Census of Population, Current
Population Survey, US NIPA
– Hours worked (employed and self-employed)
– Hours skill formation (high, medium, low skilled)
Ifo Institute for Economic Research at the University of Munich
German-US Productivity Growth Contributions
By Industry Type and High-Skill Intensity, I
• ALP Growth Contributions by Goods-Producing Industries
1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
GER
USA
GER
Skill-Intensive
1992-1995
Others
USA
GER
USA
GER
Skill-Intensive
1996-2000
Others
USA
GER
USA
GER
Skill-Intensive
USA
Others
2001-2005
Notes: Hours reallocation excluded. Sources: EUKLEMS Growth and Productivity Accounts (2008), IIGAD (2008) and Eicher and Strobel (2009)
Ifo Institute for Economic Research at the University of Munich
German-US Productivity Growth Contributions
By Industry Type and High-Skill Intensity, II
• ALP Growth Contributions by Services
1.50%
1.00%
0.50%
0.00%
-0.50%
GER
USA
GER
Skill-Intensive
1992-1995
Others
USA
GER
USA
GER
Skill-Intensive
1996-2000
Others
USA
GER
USA
GER
Skill-Intensive
USA
Others
2001-2005
Notes: Hours reallocation excluded. Sources: EUKLEMS Growth and Productivity Accounts (2008), IIGAD (2008) and Eicher and Strobel (2009)
Ifo Institute for Economic Research at the University of Munich
German-US Sectoral ALP Growth Contributions, I
1992–1995
OTHER, ICT-Using
HS, ICT-Using
HS, ICT-Producing
HS, ICT-Producing
OTHER, ICT-Using
Communications
Chemicals
Machinery
Wholesale Trade
Land Transport
Electricity, Gas
Basic Metals
Financial Intermediation
Agriculture, Forestry, Fishing
Non-Metallic Mineral Products
Auxiliary Transport Activities
Motor Vehicles
Radio, TV & Comm. Equipment
Office Machinery & Computers
Electrical Apparatus n.e.c.
Insurance
Energy Mining & Quarrying
Air Transport
Rubber, Plastic
Rental & Leasing Services
Wood Products
Water Transport
Textiles
Mining & Quarrying, ex. Energy
Fabricated Metal Products
Instruments
Apparel
Publishing, Printing
Research and Development
Leather
Water Supply
Paper, Pulp
Recycling
Retail Trade
Real Estate
Other Transport Equipment
Computer and Related Activities
Aux. Financial & Insurance
Furniture & Manufacturing n.e.c.
Food & Tobacco
Hotels & Restaurants
Sale & Repair of Motor Vehicles
Coke, Petroleum, Nuclear Fuels
Other Business Services
Construction
-0.15%
GER
-0.10%
-0.05%
0.00%
0.05%
0.10%
0.15%
0.20%
USA
0.25%
Notes: HS = High-Skill Intensive. Hours reallocation excluded. Sources:
EUKLEMS Growth and Productivity Accounts (2008) and IIGAD (2008).
0.30%
Ifo Institute for Economic Research at the University of Munich
German-US Sectoral ALP Growth Contributions, II
1996–2000
OTHER, ICT-Using
HS, ICT-Using
HS, ICT-Producing
OTHER, ICT-Using
HS, ICT-Producing
HS, ICT-Using
Wholesale Trade
Financial Intermediation
Communications
Electricity, Gas
Chemicals
Office Machinery & Computers
Electrical Apparatus n.e.c.
Agriculture, Forestry, Fishing
Fabricated Metal Products
Machinery
Other Transport Equipment
Retail Trade
Publishing, Printing
Rental & Leasing Services
Instruments
Basic Metals
Radio, TV & Comm. Equipment
Computer and Related Activities
Auxiliary Transport Activities
Paper, Pulp
Water Transport
Non-Metallic Mineral Products
Rubber, Plastic
Research and Development
Wood Products
Air Transport
Land Transport
Furniture & Manufacturing n.e.c.
Apparel
Food & Tobacco
Water Supply
Sale & Repair of Motor
Textiles
Mining & Quarrying, ex. Energy
Construction
Leather
Recycling
Hotels & Restaurants
Coke, Petroleum, Nuclear Fuels
Aux. Financial & Insurance
Energy Mining & Quarrying
Real Estate
Insurance
Motor Vehicles
Other Business Services
-0.60%
GER
-0.40%
-0.20%
0.00%
0.20%
USA
0.40%
Notes: HS = High-Skill Intensive. Hours reallocation excluded. Sources:
EUKLEMS Growth and Productivity Accounts (2008) and IIGAD (2008).
0.60%
Ifo Institute for Economic Research at the University of Munich
German-US Sectoral ALP Growth Contributions, III
2001–2005
OTHER, ICT-Using
HS, ICT-Producing
OTHER, ICT-Using
HS, ICT-Producing
HS, ICT-Using
Real Estate
Motor Vehicles
Chemicals
Wholesale Trade
Communications
Radio, TV & Comm. Equipment
Electricity, Gas
Financial Intermediation
Auxiliary Transport Activities
Machinery
Office Machinery & Computers
Other Transport Equipment
Water Transport
Sale & Repair of Motor Vehicles
Rubber, Plastic
Agriculture, Forestry, Fishing
Retail Trade
Construction
Fabricated Metal Products
Paper, Pulp
Instruments
Non-Metallic Mineral Products
Textiles
Apparel
Rental & Leasing Services
Water Supply
Electrical Apparatus n.e.c.
Publishing, Printing
Wood Products
Leather
Furniture & Manufacturing n.e.c.
Recycling
Mining & Quarrying, ex. Energy
Computer and Related Activities
Research and Development
Land Transport
Energy Mining & Quarrying
Hotels & Restaurants
Basic Metals
Coke, Petroleum, Nuclear Fuels
Air Transport
Food & Tobacco
Aux. Financial & Insurance Intermed.
Insurance
Other Business Services
-0.30% -0.20% -0.10%
i
GER
0.00%
0.10%
0.20%
0.30%
0.40%
USA
0.50%
Notes: HS = High-Skill Intensive. Hours reallocation excluded. Sources:
EUKLEMS Growth and Productivity Accounts (2008) and IIGAD (2008).
0.60%
Ifo Institute for Economic Research at the University of Munich
German-US ICT and High-Skill Complementarities:
Contributions to ALP Growth
• ICT Capital Deepening and High-Skill Intensity
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%
0.0%
GER
USA
1992-1995
GER
USA
1996-2000
GER
USA
2001-2005
ICT Cap Deep Others
ICT Cap Deep Skill-Intensive Services
ICT Cap Deep Skill-Intensive Goods-Producing
Notes: Hours reallocation excluded. Sources: EUKLEMS Growth and Productivity Accounts (2008), IIGAD (2008) and Eicher
and Strobel (2009).
Ifo Institute for Economic Research at the University of Munich
German-US ICT and High-Skill Complementarities:
Contributions to TFP Growth
• Total Factor Productivity (TFP) and High-Skill Intensity
1.80%
1.30%
0.80%
0.30%
-0.20%
-0.70%
GER
USA
GER
1992-1995
TFP Others
TFP Skill-Intensive Services
USA
1996-2000
GER
USA
2001-2005
TFP Skill-Intensive Goods-Producing
Notes: Hours reallocation excluded. Sources: EUKLEMS Growth and Productivity Accounts (2008), IIGAD (2008) and Eicher
and Strobel (2009).
Ifo Institute for Economic Research at the University of Munich
Industry Contributions to Aggregate TFP Growth
• US–German TFP Contributions (5-year avg)
TFP Contributions GER
TFP Contributions US
1992–
1995
1996–
2000
2001–
2005
1992–
1995
1996–
2000
2001–
2005
Energy Mining & Quarrying
0.04
-0.03
-0.02
---
---
---
Electrical & Optical Equipment
0.06
0.28
0.17
0.47
0.76
0.32
Transport Equipment
Manufacturing n.e.c., Recycling
Electricity, Gas & Water Supply
-0.03
-0.03
-0.01
-0.07
0.01
0.11
0.21
-0.02
0.09
0.01
0.01
0.03
0.06
0.02
0.09
0.16
0.04
-0.01
Transport
---
---
---
-0.01
-0.03
0.10
Communications
---
---
---
0.02
-0.08
0.27
Financial Intermediation
0.01
0.02
-0.17
-0.09
0.32
0.07
Real Estates
0.21
-0.03
0.14
0.12
-0.05
0.24
Business Activities
-0.22
-0.58
-0.37
-0.06
-0.26
0.16
High-Skill-Intensive Industries
Goods-Producing Industries:
Market Services:
Notes: Business Actives comprise: Rental and Leasing Services, Computer and Related Activities, Research and Development and Other Business
Services (e. g. legal, accounting, book keeping and auditing services, tax consultancy, market research and public opinion polling, business and
management consultancy, architectural and engineering activities, advertising)
Ifo Institute for Economic Research at the University of Munich
German-US ICT and High-Skill Complementarities:
Fixed-Effects Regressions
Dep. Var.: ALP Growth
Other Industries
High-Skill-Intensive
Energy Mining & Quarryinga)
Services
Production
GER (Ia)
US (Ib)
GER (IIa)
US (IIb)
ICT Capital Deepening
-0.0818
0.0873
-0.0290
0.2614**
[0.0604]
[0.1087]
[0.0758]
[0.1019]
-0.1818**
[0.0869]
Office Machinery & Comp.
1.9817***
[0.0543]
Other Elect. Equip. & Instr.b)
-0.4955
[0.2980]
0.5342***
[0.1159]
Transportc)
0.4385
[0.3052]
0.8479*
[0.4661]
0.0625
[0.0778]
-0.0375
[0.0986]
-0.2505**
[0.1153]
0.2754
[0.2092]
Furniture & Manufact. n.e.c.
Electricity, Gas & Water
Communicationsc)
Financial Intermed. & Insura.
Real Estates
Production
Services
GER (Ia)
US (Ib)
GER (IIa)
US (IIb)
Non-ICT Capital Deepening
0.7134***
0.4687***
-0.0626
-0.0520
[0.1831]
[0.1160]
[0.2444]
[0.1088]
-0.1502
[0.6517]
2.7689***
[0.1243]
-0.0842
1.1050***
[0.2763]
[0.1425]
-0.4892***
-0.7729**
-0.1629
0.6283**
[0.1156]
[0.3634]
-0.1632
[0.1200]
-0.3358*
[0.1727]
[0.1145]
0.2473
[0.2016]
0.0472
[0.2694]
[0.1907]
-0.4571**
[0.1778]
0.5895***
0.0353
0.0913
[0.0984]
[0.0932]
[0.4893]
1.2132***
[0.1263]
0.5952***
[0.1042]
0.0456
-0.3707***
1.5863***
0.8653**
[0.0952]
[0.0937]
[0.4168]
[0.3015]
Business Services
0.0428
-0.2011*
0.0632
0.0058
[0.0896]
[0.0902]
[0.2177]
[0.1488]
Observations
378
224
238
126
378
224
238
126
Adj. R2
0.38
0.58
0.24
0.69
0.38
0.58
0.24
0.69
Time Dummies
yes
yes
yes
yes
yes
yes
yes
yes
Notes: Hours reallocation excluded. Sources: EUKLEMS Growth and Productivity Accounts (2008), IIGAD (2008) and Eicher and Strobel (2009).
Ifo Institute for Economic Research at the University of Munich
Conclusion
• ICT-skill effects show stronger contributions to labor
productivity in the US, while TFP collapsed strongly in German
High-Skill-Intensive services
• Evidence for ICT-skill effects in US and German goodsproducing industries and services (e.g. Office Machinery &
Computers, Financial Intermediation & Insurance)
• But there are also ICT effects outside High-Skill-Intensive US
industries (e.g. Wholesale and Retail Trade)
• German TFP collapse is mainly attributed to skill-intensive
Business services
• US skill-intensive Business services performed much better
post 2000
Ifo Institute for Economic Research at the University of Munich
Future Research
• ICT diffusion and product market regulations (Nicoletti et al.,
2006)
• Effects on low- and medium-skilled workers (e.g. job
polarization in the US labor market, see Autor, Katz &
Kearney, 2006)
• Measurement of services output could mask real productivity
performance in those sectors
Ifo Institute for Economic Research at the University of Munich
Thank You for Your
Attention!
Ifo Institute for Economic Research at the University of Munich
Industry Classification, II
High-Skilled Shares in Total Hours Worked
1
Agriculture, Forestry, Fishing
Industry
Class
Germany
1991–2005
Industry
Class
USA
1991–2005
OTH
3.44
OTH
14.66
HS
7.89
OTH
20.36
Goods-Producing Industries:
2
Energy Mining & Quarrying
3
Food & Tobacco, Textiles
OTH
2.36
OTH
14.21
4
Other Manufacturing
OTH
6.23
OTH
20.27
5
Electrical & Optical and Transport Equipment
HS
13.44
HS
30.88
6
Manufacturing n.e.c., Recycling; Electricity,
HS
7.89
HS
20.75
OTH
3.92
OTH
11.07
Gas & Water Supply
7
Construction
Market Services:
8
Wholesale & Retail Trade, Hotels & Catering
OTH
3.25
OTH
17.65
9
Transport and Communications
OTH
3.43
HS
21.36
10
Financial Intermediation
HS
10.05
HS
40.69
11
Real Estates, Renting and Business Activities
HS
13.88
HS
43.80
Median
6.23
20.36
Mean
6.89
23.25
Notes: HS = High-Skill Intensive, OTH = Others; Non-market services are excluded. German WZ2003 industry classification. US-SIC industry
classification. Sources: EUKLEMS Growth and Productivity Accounts (2008) and Eicher & Strobel (2009).
Ifo Institute for Economic Research at the University of Munich
Growth Accounting Framework, I
• Growth Accounting Approach (Jorgenson und
Griliches,1967; Jorgenson, Ho and Stiroh, 2005), Sectoral
Level (i) via Thörnqvist-Index:
 ln VAi ,t   K ,i ,t  ln K i ,t   L ,i ,t  ln Li ,t   ln TFPi ,t
with
 h , i ,t 
1
h,i,t  h,i,t 1  ,
2
h  K, L ,
 K , i , t   L , i ,t  1
VA
Value Added
L
Labor Services
K
Capital Services
υ
Nominal Factor Income Shares
TFP
Total Factor Productivity (“Residual“)
• Standard Growth Accounting Assumptions:
– Constant returns to scale
– Perfect competition
– Producers behave efficiently
Ifo Institute for Economic Research at the University of Munich
Growth Accounting Framework, II
• Average Labor Productivity, Industry Level:
 ln ALPi ,t  K ,i ,t  ln ki ,t  L,i ,t  ln QiL,t   ln TFPi ,t
ALP 
k
VA
H
K
H
QL 
L
H
Value Added per Hour Worked
Capital Services per Hour Worked (Capital Deepening)
Labor Quality
• Average Labor Productivity, Economy Level:
– Aggregation Across Industries (Bottom-Up Approach)


Δ ln ALP   wi υK ,i ,t Δ ln ki ,t  υL ,i ,t Δ ln QiL,t  Δ ln TFPi ,t  R H
i
RH
Hours Reallocation
w
Two-Period Average of Industry Value-Added Share in Total Value Added
Ifo Institute for Economic Research at the University of Munich
Literature I
•
•
•
•
•
•
•
•
Acemoglu, D. (1998), “Why Do New Technologies Complement Skills? Directed
Technical Change and Wage Inequality”, Quarterly Journal of Economics, 113,
1055–90.
Acemoglu, D. (2002), “Technical Change, Inequality and the Labor Market”,
Journal of Economic Literature, 40, 7–72.
Acemoglu, D. (2009), “When Does Labor Scarcity Encourage Innovation?”,
NBER Working Papers No. 14809.
Aghion, P., E. Caroli and C. García Peñalosa (1999), “Inequality and Economic
Growth: The Perspective of the New Growth Theories”, Journal of Economic
Literature, 37 (4), 1615–60.
Aghion, P. (2002), “Schumpeterian Growth Theory and the Dynamics of Income
Inequality”, Econometrica, 70, 855–82.
Autor, D. H., L. F. Katz and M. S. Kearney (2006), “The Polarization of the U.S.
Labor Market”, NBER Working Paper No. 11986.
Bresnahan, T. (1999), “Computerisation and Wage Dispersion: An Analytical
Reinterpretation”, Economic Journal, 109, 390–415.
Bresnahan, Timothy, E. Brynjolfsson, and L. Hitt (2002), “Information Technology,
Workplace Organization and the Demand for Skilled Labor: Firm-level Evidence”,
Quarterly Journal of Economics, 117 (1), 339–76.
Ifo Institute for Economic Research at the University of Munich
Literature II
•
•
•
•
•
•
•
Eicher, T. S. and O. Roehn (2007), “Sources of the German Productivity Demise
– Tracing the Effects of Industry-Level ICT Investment”, German Economic
Review, 8, 211–36.
Eicher, T. S. and T. Strobel (2008), “Germany’s Continued Productivity Slump: An
Industry Analysis”, ifo Working Paper Nr. 58.
Eicher, T. S. and T. Strobel (2009), Information Technology and Productivity
Growth: German Trends and OECD Comparisons, Cheltenham: Edward Elgar
Publishing Ltd., forthcoming.
Griliches, Z. (1969), “Capital-Skill Complementarity”, Review of Economics and
Statistics, 5, 465–68.
Hornstein, A., P. Krusell and G.L. Violante (2005), “The Effects of Technical
Change on Labor Market Inequalities”, in P. Aghion and S. Durlauf (eds),
Handbook of Economic Growth, Vol. 1, Chapter 20, Amsterdam: North-Holland.
Jorgenson, D. W. and K. J. Stiroh (2000) “Raising the Speed Limit: US Economic
Growth in the Information Age”, Brookings Papers on Economic Activity, 1, 125–
211.
Jorgenson, D. W., M. S. Ho and K. J. Stiroh (2005), Productivity – Information
Technology and the American Growth Resurgence, Vol. 3, Cambridge: MIT
Press.
Ifo Institute for Economic Research at the University of Munich
Literature III
•
•
•
•
•
•
•
•
Murnane, R. J., F. Levy and D. Autor (2002), “Upstairs, Downstairs: Computers
and Skills on Two Floors of a Large Bank”, Industrial and Labor Relations
Review, 55 (3), 432–47.
Nicoletti, G., P. Conway, D. de Rosa, and F. Steiner (2006), “Product Market
Regulation and Productivity COnvergence”, OECD Econonmic Studies N. 43.
Oliner, Stephen D. and Daniel E. Sichel (2000), “The Resurgence of Growth in
the Late 1990s: Is Information Technology the Story?” Journal of Economic
Perspectives, 14 (4), 3–22.
Oliner, S. D., D. E. Sichel and K. J. Stiroh (2007), “Explaining a Productive
Decade”, FEDS Working Paper, No. 2007–63
Stiroh, K. J. (2002), “Information Technology and the U.S. Productivity Revival:
What Do the Industry Data Say?”, American Economic Review, 92 (5), 1559–76.
Stiroh, Kevin J. (2006), “The Industry Origins of the Second Surge of U.S.
Productivity Growth”, Federal Reserve Bank of New York, mimeo.
Stiroh, K. J. and M. Botsch (2007), “Information Technology and Productivity
Growth in the 2000s”, German Economic Review, 8, 255–80.
Timmer, M., T. van Moergastel, E. Stuivenwold, G. Ypma, M. O’Mahony, and M.
Kangasniemi (2007a), ‘EU KLEMS Growth and Productivity Accounts, Version
1.0, Part I Methodology’, March, 2007, available on the internet:
http://www.euklems.net/data/EUKLEMS_Growth_and_Productivity_Accounts_Pa
rt_I_Methodology.pdf
Ifo Institute for Economic Research at the University of Munich
Literature IV
•
•
Timmer, M., T. van Moergastel, E. Stuivenwold, G. Ypma, M. O’Mahony, and M.
Kangasniemi (2007b), ‘EU KLEMS Growth and Productivity Accounts, Version
1.0, Part II Sources by Country’, March, 2007, available on the internet:
http://www.euklems.net/data/EUKLEMS_Growth_and_Productivity_Accounts_Pa
rt_II_Sources.pdf
Triplett, Jack E. and Barry P. Bosworth (2004), Productivity in the U.S. Services
Sector: New Sources of Economic Growth, Washington, D.C.: Brookings
Institution Press.
Ifo Institute for Economic Research at the University of Munich
Isolating Industry Productivity Differences
• Estimation Strategy: ICT and TFP Growth


 ln TFPi ,t     j  j  HSINT j   ICT   j  jICT  HSINT j  ln kiICT
  t Dt   ei ,t
,t
• Description of variables:
–
–
–
–
TFP = Total factor productivity
kICT = ICT capital deepening (spillover effects)
HSINT = Dummy for high-skill-intensive industries (j industry groups)
D = Time dummy (t years)
• Econometric approaches: OLS and fixed effects regressions
• Separately estimated for goods producing and services
industries (allowing for parameter heterogeneity)
Ifo Institute for Economic Research at the University of Munich
Isolating Industry Productivity Differences:
TFP Growth (Goods Producing)
• TFP Growth Differentials: High-Skill-Intensive vs. Others
Total Sample (1991–2005)
ICT Capital Deepening
ICT  HS Intensive Ind.:
Energy Mining & Quarrying
Office Machinery & Comp.
Other Elect. Equip. & Instr.
Transport
Furniture & Manuf. n.e.c.
Electricity, Gas & Water
Observations
Adj. R2
Time Dummies
Industry Dummies
Leverage Industries excluded
Split (>1995)
0.0090
[0.0265]
0.0010
[0.0261]
0.0041
[0.0257]
0.0150
[0.0224]
-0.1703
[0.3517]
-0.0012
[0.0347]
-0.0798
[0.1099]
0.0505
[0.0681]
0.2256*
[0.1188]
-0.0748
[0.0440]
-0.1404
[0.3558]
0.0037
[0.0334]
-0.1358
[0.1326]
0.0507
[0.0718]
0.2368*
[0.1257]
-0.0936**
[0.0416]
----0.0179
[0.0326]
-0.1455
[0.1306]
0.0557
[0.0621]
0.2402*
[0.1253]
-0.0828*
[0.0434]
----0.2389***
[0.0276]
-0.2188
[0.1402]
0.1212***
[0.0409]
0.2218*
[0.1289]
-0.0372
[0.0322]
392
0.10
yes
-----
392
0.11
yes
yes
---
364
0.22
yes
yes
yes
260
0.28
yes
yes
yes
Notes: Significance levels: * significant at 10 percent; ** significant at 5 percent; *** significant at 1 percent.
Ifo Institute for Economic Research at the University of Munich
Isolating Industry Productivity Differences:
TFP Growth (Services)
• TFP Growth Differentials: High-Skill-Intensive vs. Others
Total Sample (1991–2005)
ICT Capital Deepening
ICT  HS Intensive Ind.:
Financial Intermed. & Insurance
Real Estates
Business Services
Observations
Adj. R2
Time Dummies
Industry Dummies
Split (>1995)
-0.0157
[0.0201]
-0.0255
[0.0330]
-0.0527
[0.0539]
0.2126***
[0.0374]
0.0520
[0.0353]
0.0122
[0.0270]
0.1986**
[0.0693]
0.0585
[0.0534]
0.0108
[0.0447]
0.1592**
[0.0668]
0.0759*
[0.0423]
0.0241
[0.0557]
238
0.05
yes
---
238
0.12
yes
yes
170
0.14
yes
yes
Notes: Significance levels: * significant at 10 percent; ** significant at 5 percent; *** significant at 1 percent.
– Business Services could not reap productivity gains from ICT
• Comprise around 16 percent of market economy value-added
• Exhibit strong negative drag on services’ aggregate TFP growth