The effects of ICT investment on productivity in Spain Prepared for the NEREC conference on Electronic Communications Madrid, 11 September 2009

Introduction Motivation The issue ●Crisis and competitiveness ●Public policy sometimes in opposite directions ●What is the total effect of ICT capital on productivity?

The economic framework Logs, increments and CRS Contribution to VAG Contribution to LP Perfect competition in input and output markets

Spillovers in production Indirect effect of ICT through its impact TFP Notwithstanding Stiroh (2002)

Earlier studies in Spain ●Several studies measuring the relationship between ICT, output growth and productivity ●Most of them use the GAF approach: □Positive contribution to output and labour productivity growth □Mixed evidence on the contribution to TFP ●Some econometric studies: □Positive effect on TFP of the stock of technological capital

●Empirical analysis ●Results ●Conclusions

The relationship between ICT and TFP A first look ●TFP reached its max value in 1984 and performed very poorly after 1989 ●No clear relationship between TFP and ICT capital growth □TFP and ICT capital growth present similar movements before 1995 □But, no apparent relationship afterwards … the relationship (if any) between ICT capital growth and TFP seems to differ before and after 1995

Specification ●Preferred specification controls for □ICT capital growth □Non-ICT capital growth □R&D effort ●Consider different impact before and after 1995 ●OLS and alternative estimates (FE, IV) TFP it =  a it +  ICT  ICT it +  NICT  NICT it +  k X it k +  it spillover Other relevant factors

Results OLS ESTIMATESFE & IV ESTIMATES Lag of dependent variable? YES Estimation method OLS FE FE & IV ICT growth 0.103* Before **0.201***0.187***0.226***0.215*** After Non-ICT growth **-0.329*-0.378** **-0.264** R&D 0.079***0.078***0.089***0.726***0.610***0.807*** * Significant at 10% level, ** significant at 5% level and *** significant at 1% level Negative spillover Positive and significant effect

Conclusions Summary ●Does ICT exerts a spillover on TFP? ●We find a positive relationship between TFP and ICT capital growth, at least, up to 1995 □Absence of spillover or a positive impact is still to come ●Results confirm the importance of R&D in the evolution of TFP Our analysis has limitations ●More attention to dynamics ●Separate impact of different ICT components ●Account for the role of other potentially relevant factors □Regulations □International technological spillovers □Degree of competition

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