IT Induced Productivity Gains at National Levels: Characteristics of an Appropriate Theoretical Model
Abstract: Numerous studies in recent years have examined the productivity impact of information technology (IT). The IT impact has been studied both at the macro and micro level. This paper confines to the studies at the national level in the U.S. Evidence varies from unqualified support for IT as the source of U.S. productivity resurgence in the 1990s to skepticism and doubt. One possible explanation for widely divergent results for the impact of IT on productivity is the wide variation in both theoretical and empirical methodologies utilized in studying the impact of IT on productivity. Therefore, our study closely examines the appropriateness of theoretical models employed in studying the IT impact at the national level, with a view to determine the attributes of the most appropriate model. Our findings suggest that a model based on the Cobb-Douglas production function allows the introduction of IT (in its different forms) to estimate the effect of IT on productivity both from the point of view of capital deepening and total factor productivity (technical change). However, all differences are not due to model differences differences in the scope of the data are also important. Finally, we offer a process to resolve the identified discrepancies.
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Authors: Anandi P. Sahu, Ronal L. Tracy