Information technology and productivity in developed and developing countries

Previous research has found that information technology (IT) investment is associated with significant productivity gains for developed countries but not for developing countries. Yet developing countries have continued to increase their investment in IT rapidly. Given this apparent disconnect, there is a need for new research to study whether the investment has begun to pay off in greater productivity for developing countries. We analyze new data on IT investment and productivity for 45 countries from 1994 to 2007, and compare the results with earlier research. We find that upper-income developing countries have achieved positive and significant productivity gains from IT investment in the more recent period as they have increased their IT capital stocks and gained experience with the use of IT. We also find that the productivity effects of IT are moderated by country factors, including human resources, openness to foreign investment, and the quality and cost of the telecommunications infrastructure. The academic implication is that the effect of IT on productivity is expanding from the richest countries into a large group of developing countries. The policy implication is that lower-tier developing countries can also expect productivity gains from IT investments, particularly through policies that support IT use, such as greater openness to foreign investment, increased investment in tertiary education, and reduced telecommunications costs. © 2013 M.E. Sharpe, Inc. All rights reserved

Explaining the gaps in labour productivity in some developed countries

Modern economic theories explain differences in productivity and economic growth by differences in political and economic institutions, and differences in culture, geographical location, policies, and laws. Another new strand of the literature explains productivity and economic growth differentials by gaps in general purpose technology and information and communication technology, while another literature cites real exchange rate depreciations as the main explanatory variable. These gaps might explain differences in economic performances between developed and developing countries, but they are too small to explain differences between developed industrial economies such as New Zealand and Australia or Canada and the United States. In this paper, more than eighty percent of labour productivity gaps between New Zealand and Australia and Canada and the United States are explained by endogenous technology shocks (TFP) and capital intensities.Productivity, nontradable prices, real exchange rate

The macroeconomic effect of the information and communication technology in Hungary

It was not until the beginning of the 1990s that the effects of information and communication technology on economic growth as well as on the profitability of enterprises raised the interest of researchers. After giving a general description on the relationship between a more intense use of ICT devices and dynamic economic growth, the author identified and explained those four channels that had a robust influence on economic growth and productivity. When comparing the use of information technonology devices in developed as well as in developing countries, the author highlighted the importance of the available additional human capital and the elimination of organizational inflexibilities in the attempt of narrowing the productivity gap between the developed and developing nations. By processing a large quantitiy of information gained from Hungarian enterprises operating in several economic sectors, the author made an attempt to find a strong correlation between the development level of using ICT devices and profitability together with total factor productivity. Although the impact of using ICT devices cannot be measured unequivocally at the microeconomic level because of certain statistical and methodological imperfections, by applying such analytical methods as cluster analysis and correlation and regression calculation, the author managed to prove that both the correlation coefficient and the gradient of the regression trend line showed a positive relationship between the extensive use of information and communication technology and the profitability of enterprises

The IT-Productivity Linkage at the Country Level for Developing Economies

Recent evidence suggests that information technology (IT) investments have a positive impact on productivity and economic growth for developed countries. However, for developing countries the relationship between IT investment and economic growth remains unclear. This paper draws on the resource-based view (RBV) theory with its notion of resource complementarity to propose a theoretical model of how factors interact with IT investment to influence economic productivity. The proposed model posits a number of factors effecting the productivity of IT investment in developing economies

Contribution of ICT to the Chinese Economic Growth

The view about systematic irrationality of investors and managers in investment with reference to information and communication technology (ICT) with no effects on productivity growth is called productivity paradox. Research suggests that ICT return in developed nations is significant and positive, but not in developing countries. This paper challenges the above conclusion by examining the contribution of ICT to the Chinese economic growth. We investigate the relationship between TFP growth and ICT capital and provide estimation of the returns to ICT investment. The contribution of ICT to economic growth has not been studied earlier for the developing countries like China. The empirical results suggest that China has reaped the benefits of ICT investment. The policy implications for the Chinese ICT investment and development are also discussed. The results add to our understanding of how ICT affects growth in the context of economic development.Productivity paradox; ICT; economic development; TFP growth; China

Harsha de Silva, Director, E-development Labs (private) Limited and Senior Economist, LIRNEasia - Agricultural Market Development through Information and Communication Technology (ICT): A Developing Country Experience

One of the fundamental characteristics of a well functioning market is the ability to transmit useful information to decision makers at the micro-level, which will ultimately culminate in the development of effective macro-level policies. A key assumption in economics is that market information is readily available to role players in business and marketing. In reality however, farmers in the developing world, unlike their developed countries counterpart, are still faced with the challenge of accessing credible market information. Market information is an essential component of agricultural production, distribution and marketing. The availability of timely and accurate market information to farmers by means of fast and effective modern information technologies has enormous potential of greatly enhancing agricultural production, investment, financial and strategic decisions. The objective of this executive interview is to show how information and communication technology (ICT - enabled agricultural market information service can improve productivity, bargaining power and market profitability of rural farmers in developing countries). Dr. Harsha de Silva, the architect and implementer of Govi Gnana Service (an agricultural knowledge service: GGS) in Sri Lanka shares his views and experience. The interview was conducted at the 15th Annual World Food and Agribusiness Forum, Symposium and Case Conference in Chicago, USA.Information and communication technology (ICT), agricultural markets, market information, Agribusiness,

Doctor of Philosophy

dissertationDuring the last decade, the growth rate of outward foreign direct investment (FDI) from developing and transition economies has been outpacing that from developed economies. Their investment in other developing countries represents a burgeoning instance of South-South cooperation. The three essays in this dissertation examine the key issues and potential challenges of South-South FDI. The first chapter observes the growing importance of South-South FDI flows. With the drying up of outward FDI flows from developed countries since the financial crisis, the importance of investment from other developing countries increased and accounted for an estimated 34% of the world's outward FDI in 2010, compared with 25% in 2007. A large share of outward FDI stock from developing and transition economies is concentrated in the services sector. The nature of multinational companies (MNCs) is also changing with an increasing number of countries in developing and transition economies hosting such companies. When Southern MNCs invest abroad, they rarely have access to proprietary assets such as technology, financial capital, brands, and technical know-how. They are able to catch up with Northern MNCs through strategic and organizational innovations. They have greater access to network capital suitable for developing country markets. This network capital might include information on supply lines, local financing, local tastes, bureaucratic procedures, minimizing transaction costs, and other local idiosyncracies. The establishment size of Southern MNCs tends to be on average much smaller than the establishment size of Northern MNCs. Southern establishments are also comparatively less productive and tend to pay lower wages than Northern establishments. Until recently, the parsimonious explanation for the scarcity of capital flows to developing countries ranged from human capital to institutional risk. Although the expected return on investment might be high in many developing countries, it does not flow there because of the high level of uncertainty associated with those expected returns. The second chapter sheds light on the question to what extent the alternative explanations of Lucas paradox holds particularly for South-South FDI. Using a bilateral panel data set, I estimate an augmented gravity model using the Poisson pseudo-likelihood estimator. The empirical evidence suggests that per capita income, human capital, and average institutional quality are not important variables explaining South-South FDI. Asymmetric information as proxied by the weighted distance variable is highly significant. Southern MNCs underinvest in markets that are remote and where access to network capital and accurate and timely local information is difficult. Southern MNCs require network capital and local host country information to overcome their disadvantage in proprietary assets. Therefore, information asymmetry may be a greater concern to Southern MNCs than human capital or institutional risk. Lastly, South-South FDI is also more sensitive to natural resource endowments and regional free trade agreements than North-South FDI. Recently policymakers in developing countries have encouraged South FDI as a means to encourage productivity growth and technology transfer. However, Southern MNCs seldom have proprietary assets that foster positive externalities and contribute to productivity spillovers. Chapter 3 investigates the contribution of Southern FDI in enhancing efficiency in Rwanda. Based on a sample of 6,707 private sector firms, the quantile regression technique is employed. By estimating quantile regressions, I am able to test for differences in productivity and productivity spillovers by North and South FDI across the productivity conditional distribution. The results suggest that productivity in Rwanda is improved with the entry of both North and South FDI. However, the effect North FDI on productivity is stronger than that of South FDI. Moreover, productivity spillovers stemming from South FDI are limited to low productivity local firms, which suggests that any efforts to attract South FDI should take into account the policy objectives of an economy as well as the firm productivity distribution involved

Imperfect Partnership: Effects of Collaboratories on Scientists from Developing Countries.

In recent years, researchers have hypothesized that a new form of scientific collaboration--the “collaboratory”--holds promises to greatly benefit scientists from developing countries. It is argued that distributed collaborations enabled by various information technologies can allow scientists from developing countries to reach remotely located experts, instruments, and databases that their local institutions cannot afford. However, there have been no empirical studies to prove or disprove this. Prior studies of the impact of information technology on scientific work tend to focus on the correlation between technology use and scientific productivity as measured by publications and citations. This approach ignores the mediating factors affecting the relationship between information technology use and scientific productivity. Adopting a qualitative approach (interviews complemented by field observation), I explore how scientists from developing countries benefit from reaching remotely located resources and participating in communities of practice and networks of practice in the virtual organization of a collaboratory. I also demonstrate how the relation of resource dependency, the nature of collaborative work, geographical distance and cultural differences influence scientists’ participation in collaborataries. These factors affect the ability of scientists from developing countries to access resources of collaboratories, build relationships with other collaboratory members and learn knowledge and practice from their collaborators in the developed world. In addition, I show that collaboratories facilitate technology transfer from scientists from developed countries to those from developing countries. However, scientists from developing countries demonstrate an urgent need to build general competence in performing research. This kind of competence can only be achieved through long-term exposure to the practices of advanced laboratories from the developed world. Collaboratories failed to meet the need because of their project-oriented nature and their funding mechanism.Ph.D.InformationUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/58369/1/airongl_1.pd