Information Technology, Productivity, and Economic Growth

The often-advocated view that the information technology revolution will change the world must stem from the basic premiss that investment in IT has a visible impact on productivity and economic growth. But how can we measure this impact and how large is it? By surveying previous studies and by presenting new micro- and macroeconomic evidence, this collection shows that in recent years the use of IT in the production of goods and services has had a strong influence on productivity and economic growth in industrial and in newly industrialized countries. Yet developing countries seem neither to have invested in IT nor benefited from such investments to the same extent as industrial countries. There is concern that information is becoming a commodity, like income and wealth, by which countries are classified as rich and poor. The contributors to this volume argue that investment in infrastructure, physical capital, and education is the key to economic development. This is an old policy prescription in the economics of development. What is new is the suggestion that the IT content of these investments should be high. The use of IT is so widely spread throughout the world economy that no single country can avoid investing in this technology if it wants to improve the standard of living of its citizens. Besides providing citizens with access to IT and to IT education and training, governments should promote participation in the information society, thus generating a sufficiently strong demand base for information products. By developing advanced applications of IT, and by becoming a model for the private sector, governments can alter worker, firm, and consumer attitudes, and lower their costs of adopting IT. The use of IT, not necessarily its production, is what matters for economic development.