1. Measuring ICT Impact on Growth: a Survey of Recent Findings Vincenzo Spiezia Senior Economist Head, ICT Unit Directorate for Science, Technology & Industry OECD

2. ICT: a General Purpose Technology Some technical change comes in small incremental improvements; some comes as radical changes in products and processes. Every once in a while a new technology comes onto the scene that impacts on more or less everything in our lives: what we produce how we produce it how we organize and manage production the location of productive activity the infrastructure we need the laws we require concerning such things as property rights and permitted forms of business organization. Richard Lipsey calls such technologies General Purpose Technologies (GPTs)

3. In my presentation, I will try to make… 4 points about ICT and Growth: 1.It is not only about productivity 2.Productivity depends on intangibles… 3.…but intangibles are fed by ICT 4.Research Agenda

4. What we produce ICT as a product innovation

5. ICT and Growth ICTs area major driver of GVA growth in OECD ICT sectors have been growing faster than non-ICT ICT services even faster Particularly computer & related services Similar trend for employment growth

6. ICT and Growth ICT sector feeds growth through 3 channels: Final demand: ICT offers new goods and services for consumers; Demand multiplier: ICT increases demand for the output of other industries; Supply multiplier: ICT creates new opportunities for the supply to other industries.

7. Final demand Communications have been the fastest-growing household expenditure item since 1995 ICT services have been the fast-growing category in trade in services

8. Final demand Propensity to consume ICT differs among countries Share of households ICT expenditures in OECD countries, 2005

9. Final demand Propensity to consume ICT differs among households

10. Industry linkages: Where do ICT go? Source: Robert D. Atkinson

11. ICT contribution to growth Compare: actual growth rate of total output; the growth rate that would have occurred if no ICT output was produced. Ex: Finland

12. ICT contribution to growth 1995-2000 Largest in Finland, US, Sweden Large also in UK and Netherlands Small in Germany and Italy

13. ICT contribution to growth 2001-2006 Largest in UK, Finland and Sweden Large also in US and Belgium Small in France and Italy

14. How we produce ICT as a process innovation

15. ICT and Productivity Solow’s paradox / large TFP Progress in measurement OECD: Hedonic prices, Capital services, Software, Output in services, STAN Database, Productivity database The Economic Impact of ICT: Measurement, Evidence and Implications (2004): 1. ICT investments account for a significant part of GDP growth; 2. ICT investments contribute to MFP growth; 3. ICT producing sectors raise overall productivity; 4. ICT services increase productivity in using sectors; 5. ICT + other factors have stronger effects at the firm level

16. ICT and Productivity ICT investment matters more than non-ICT… …but MFP growth remains the main driver ICT investment has no impact on MFP growth since 1995(Van Ark, 2007)

17. What explains large MFP? 3 explanations 1.What we measure is still badly measured: Capital services, hedonic prices, poor industry data 2.We fails to measure “complementary” investments: Organisational changes (Oulton& Srinivasan, 2005) 3.We fails to measure intangibles: Van Ark (2004), McGrattan and Prescott (2005), Corrado, Hulten, and Sichel (2005; 2006); Fukao et al. (2007)

18. Intangibles The Knowledge Capital of the Firm Source: Marrano, Haskel and Wallis based on Corrado, Hulten & Sichel

19. How important are intangibles? Intangibles explain a large part of MFP Significant impact also in the UK and Japan USA

20. How we produce ICT as a GPT

21. Organisational changes, skills, innovation, business models, intangibles are complementary to ICT ICT creates opportunities to change organisation, improve skills, speed up innovation and invest in intangibles Intangibles are endogenous!

22. ICT and Innovation ICT-related patents: 35% of OECD PCT filings in 2005; over 50% in Singapore and Finland more than doubled in China over 1996-2005

23. Patterns and Trends (1/5) Innovation in non-ICT sectors (patents) depends on innovation inputs from ICT (citations of ICT patents) The share of ICT citations in total citations in OECD has increased by 7.5 percentage points, from 16.7% in 1985-89 to 24.2% in 2000-05

24. Patterns and Trends (2/5) The intensity of ICT citations differs among countries: In Finland (47%) almost double OECD (24%). Very high also in Korea (36%), the Netherlands (35%) and Japan (31%).

25. Patterns and Trends (3/5) Intensity of ICT citations has increased faster in some countries: over 4.5 times in Finland and Korea, 3 times in Sweden. Smaller increase in countries starting with a high ICT intensity Japan, the Netherlands and the US.

26. Patterns and Trends (4/5) The weight of ICT citations is the largest in ICT industries However, ICT citations account for a large share of total citations also in some non-ICT industries 2000-05

27. ANALYTICAL CHALLENGES Towards a Research Agenda

28. Measuring Intangibles Organisation Firm-networks e-business Hedonic prices Industry-level data Services output R&D

29. Analysing interactions Within firms between ICT and complementary investments Among firms ICT-enabled networks Spillovers e-business Between firms and the market competition e-commerce Among industries between ICT-producing and ICT-using industries Among technologies ICT-driven innovation