Do Investments in ICT Help Economies Grow?

Abstract

A common assumption behind investments in information and communication technologies (ICT) is that of the resultant improvements in productivity. To substantiate this assumption with empirical evidence in the context of transition economies (TE), the authors use time series data sets spanning the period from 1993 to 2008 to inquire into the impact of investments in telecoms on total factor productivity (TFP). Results indicate that the improvements in productivity of the most of TEs in the sample was inconsistent and not based on the increase in the levels of investments and labor. Additionally, the results of the data analysis suggest that the dominant source of growth in productivity is not static, but changes over time. While in an earlier period (1993-2002) of transition, TEs grew based on technological change, it is efficient utilization of the already available technology that became a dominant source of growth in the later (2003-2008) period of transition.