The Importance of Being it

By: Simone Valentini

The paper considers a growth accounting exercise for Italy, France, Germany, Spain, Finland, Ireland, UK and USA in the period 1980-2004 integrating the results with the those obtained by an econometric model aimed, above all, at singling out an estimation of IT production to the total factor productivity. The results of the pure growth accounting model are principally:

&bull The total factor productivity is, with little exceptions, the principal GDP growth component. Although the unweighed average (+1.35 in the 1980-2004) indicates its significance there are huge differences among countries and in the time.

&bull The labour contribution in European countries is near to zero and clearly in contrast with the USA +0.95% datum (1980-2004).

&bull The contribution of Non IT Capital shows a high unweighed average of +0.75% (1980-2004) and has a lower variability, among countries, respect to the TFP contribution.

&bull USA shows the biggest IT capital contribution with a +0.79 in the period 1980-2004. The IT capital contribution is also high in UK, Finland and Ireland but principally in the period 1995-2004 (on average about +0.6%). The other considered European countries show a less evident IT capital contribution with a +0.35% on average among France, Germany, Spain and Italy. The IT capital contribution variability among the considered countries is evident (but lower than the variability of the other components). The variability in the time is huge.

Abandoning the hypothesis of perfect competition we used the econometric model to estimate the contribution of IT production to the total factor productivity. The results are presented (period 1980-2004). The major highlights are:

&bull The TFP (seen here as the total factor productivity not depending by any production factors) is sensibly reduced. The great part of the TFP reduction is attributed to IT capital with the exceptions of Spain and Italy.

&bull The contribution of IT capital to TFP is high for USA, Finland, Ireland and UK; medium for France and Germany; low for Italy and Spain.

&bull The total information technology contribution (sum of the direct IT capital contribution to GDP growth and of IT production contribution to TFP) is, by large, the first growth factor for all the considered countries except for Italy and Spain. The new economy, in the period 1980-2004, has been the growth engine, not only for USA and UK, but also for Germany and France. Finland and Ireland have founded their economic growth almost exclusively on the new economy. Approximately Finland, Ireland, UK and USA (+2.23%, +2.23%, +1.59%, and +1.31% respectively) show a high contribution of new economy; France and Germany a medium supply (+1.16% and +1.06%); and Italy and Spain a low grant (+0.42% and +0.63%).

For details see:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1019027

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