A Multi-Country Empirical Study of ICT-Induced Productivity Variances by Economic Magnitude and Industry

Abstract

Global trends such as the prolonged decline in productivity growth and lower fertility rates across many regions have rendered productivity-led growth an important phenomenon. This paper investigates: 1) Does the effect of ICT use on firm-level productivity vary between firms operating in the manufacturing and services industry? 2) How does the country's economic magnitude influence the impact of ICT use on firm-level productivity in manufacturing and services firms? We incorporate the evaluation of the endogeneity issue for the generation of the final results using the 2SLS approach. Using a sample of 2407 manufacturing and service firms operating in 34 countries with diverse economic magnitude, we find that ICT use positively affects manufacturing firms' productivity compared to the service sector. Furthermore, we find that effect of ICT use on firm-level productivity is more potent for manufacturing firms operating in high-income countries when compared to their counterparts in lower-income countries.