1. “Changing Gear” Productivity, ICT and Service Industries: Europe and the United States Bart van Ark Robert Inklaar Robert H. McGuckin 17 May 2002 University of Groningen

2. Earlier Work on International Comparisons of Productivity and ICT  Macro-level growth accounting:  ICT investment intensity in Europe is increasing but at slower rate than in US  LP and TFP growth in Europe is falling behind US since 1995 and gap is widening  Industry-level productivity comparisons:  ICT production is less important as contributor to growth in Europe  Diffusion to ICT-using industries does not lead to much acceleration in productivity growth

3. What’s new in this paper?  Update and extension of 50-industry database on labor productivity for 14 OECD countries  Examine differences across ICT-producing, ICT-using and “non-ICT” industries using various techniques (shift share, econometric analysis)  First investigation into cross-country differences in industry patterns of ICT-use on basis of I(C)T-intensities

4. Main findings  ICT-producing industries show rapid acceleration in productivity growth in both Europe and U.S., but contribution is higher in U.S. due to larger size  ICT-producing services (telecommunication, computer services) perform relatively well in many European countries  ICT-using services perform significantly different from non- ICT services in both Europe and U.S...  … but only U.S. shows rapid acceleration in ICT-using services overall, and wholesale & retail trade and securities play the key role

5. Focus of this presentation is on services !  ICT-use is highest in service industries in U.S. and Europe  Data problems cloud international comparisons, but some improvements are and still can be made  ICT-using services are key to understanding opening up of U.S.-EU gap in productivity growth  Within ICT-using services and non-ICT services variation across industries is huge …  … but story points consistently to U.S. advantage being biggest in limited number of service industries (trade, securities)

6. US ICT share in capital services defines technological opportunity set for other countries

8. Service industries are among the top industries in terms of ICT intensity

9. Data issues  Main source: OECD STAN database on national accounts, based on ISIC rev. 3  Additional breakdown for ICT-producing industries and several service industries (e.g., trade and business services)  Application of US hedonic price indices for ICT production to European series improves comparability  Measurement of output in service industries is problematic across countries …  … but there is no evidence of systematic biases between countries

10. Data issues  Main source: OECD STAN database on national accounts, based on ISIC rev. 3  Additional breakdown for ICT-producing industries and several service industries (e.g., trade and business services)  Application of US hedonic price indices for ICT production to European series improves comparability  Measurement of output in service industries is problematic across countries …  … but there is no evidence of systematic biases between countries

11. ICT-using services is main source of difference between U.S. and European growth performance since 1995

12. But productivity growth in ICT-services is significantly different from non-ICT services in many countries

13. Aggregate productivity growth differential between U.S. and EU (0.8 %-points) since 1995 is dominated by productivity growth differential in trade and securities

14. … with offsetting effects mainly from non-ICT services

15. The “lagging diffusion” hypothesis for EU is supported by strong correlation between U.S. productivity growth (1990-95) and EU growth (1995-2000)