Did Information Technologies Shift Upward Multifactor Productivity in the 90s? Evidence from French Firm Level Data

Abstract

We have implemented a new methodology in order to examine the effect of Information Technologies (IT) on Multifactor Productivity (MFP) at the firm level. Although the skill biased technical change hypothesis has received a lot of empirical support, previous studies typically assumed that input efficiencies were affected homogeneously. We relax this assumption by developing a very simple model that leads us to add the cost shares of inputs interacted with IT to the usual regression relating MFP growth to IT adoption. Our results based on a sample of manufacturing firms suggest that Internet adoption increases significantly MFP, assuming away the simultaneity issue. Moreover, all inputs would not be affected in the same way. Internet would increase strongly the efficiency of female, skilled and highly skilled workers. By contrast, the adoption of personal computers, mainframe computers, transfer of data within firms and transfer of data with clients or suppliers are not correlated with MFP growth. Finally, our results suggest that the effect of IT adoption on MFP growth does not depend on the use of new work practices.