The Economic Effect of Education in an Information Technology–Penetrating Economy

Abstract

This article examines the economic effect of education in terms of its impact on the earnings of workers in an information technology (IT)–diffusing economy, based on data from Hong Kong’s 2006 by-census and survey on the usage and penetration of IT in industries. Education enhances the productivity of workers and increases their lifetime incomes. However, technological advances, if deskilling, may exert an adverse effect on workers’ earnings. The analysis of the economic effect of education is complicated by the increasing application of technologies in the workplace. This study shows that the earnings effect of education and the interaction between education and IT penetration in the workplace are positive and significant, whereas IT by itself brings about a significant negative earnings effect.