The Role of Information and Communications Technology (ICT) in Enhancing Service Sector Productivity in Palestine

Abstract

This article discusses the productivity of the Information and Communication Technology (ICT) sector using cross-sectional data from 793 service firms in Palestine. The authors have examined the impact of ICT growth on service sector productivity in Palestine using a set of indicators for ICT including internet usage, e-commerce, networks, websites, and use of “smart” phones. They find that using ICT (mainly Internet) in commerce (e-commerce) is one of the most important levers of labor productivity among service firms. Service firms that are less ICT-intensive are less productive than more ICT-intensive firms; moreover, the use of mobile phones for services other than send-and-receive calls, highly improves the labor productivity of service firms. Conversely, using a website and computer network does not positively affect the labor productivity. Regarding geographical differences in labor productivity, the analysis shows that firms in Jerusalem are characterized by higher productivity than firms in the West Bank, while firms in Gaza have a lower productivity compared to firms in the West Bank.