INFORMATION AND COMMUNICATION TECHNOLOGY AND NEW ZEALAND'S PRODUCTIVITY MALAISE: AN INDUSTRY-LEVEL STUDY

Abstract

This paper examines the link between information and communication technology (ICT) and New Zealand's labour productivity (LP) growth in 29 industries over the period 1988-2003, and over relevant sub-periods. After deriving an ICT intensity index in order to classify industries into 'more ICT intensive' and 'less ICT intensive', we compare LP growth rates for these two industry groupings. Further, we employ dummy variable regression models, including difference-in-difference models, to more formally test the relationship between ICT intensity and LP growth. The results prove to be sensitive to the time period specified. When breaks in the data series are taken into account, there seems to be support for the view that LP growth of more ICT intensive industries has improved over time relative to that of less ICT intensive industries, even though overall LP growth was weak. To put it differently, the restrained New Zealand LP performance apparent from our data seems to have been due mainly to the decline in LP growth of less ICT intensive industries. Our results illustrate that lack of overall productivity growth per se is not necessarily evidence against the beneficial productivity impacts of ICT. Rather, the proper comparison is that between the productivity performance of more ICT intensive versus less ICT intensive industries. However, our results can only be taken as suggestive, given the fact that ICT is but one of the determinants of LP, and given the many inherent measurement problems.