You Say You Want A Revolution: Information Technology and Growth

IMF Working Papers, April 1, 2002

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The information technology (IT) revolution is contributing to labor productivity growth through:
- increases in the levels of IT capital per worker; and
- total factor productivity (TFP) growth in the production of IT equipment.
Main research question: whether IT is contributing to TFP growth more generally.
Empirical findings using data on IT expenditure and production for a broad sample of countries:
- A positive, large, and significant effect of IT expenditure on the acceleration in TFP in the late 1990s.
- A smaller—and significant—effect of IT production on TFP acceleration.
- Evidence that the impact of IT expenditure on TFP growth increases over time, suggesting that spillovers materialize gradually.
Projection:
- The increase in IT expenditure across industrial countries during 1995-2000 will eventually lead to an average increase in TFP growth of about one-third of 1 percent per year.

Data sources used: IT expenditure and production for a broad sample of countries (as described in the paper).
Periods emphasized:
- late 1990s (TFP acceleration observed);
- 1995-2000 (period of increased IT expenditure driving projected TFP gains).

Establishes that IT affects productivity both via capital deepening (IT capital per worker) and via TFP in IT equipment production.
Provides evidence for economy-wide TFP spillovers from IT expenditure that accumulate over time.
Quantifies a medium-term aggregate effect: an eventual average TFP growth increase of about one-third of 1 percent per year attributable to the 1995-2000 rise in IT expenditure across industrial countries.

IMF Working Papers — You Say You Want A Revolution: Information Technology and Growth

You Say You Want A Revolution: Information Technology and Growth - WP/02/70
- You Say You Want A Revolution: Information Technology and Growth - WP/02/70 (Markdown version)
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