Internet use and labor productivity growth: recent evidence from the U.S. and other OECD countries

Abstract

This study provides evidence on the nature and extent of the effect of Internet usage or penetration on labor productivity growth, while focusing on the recent experience in OECD countries. The basic model modifies the traditional labor-augmented production function approach by integrating Internet usage as a factor that improves labor quality. Variables on output, capital, and labor are extracted from official OECD publications, and data on the penetration ratio, a proxy for Internet usage, is obtained from an online source. The result is a panel that covers 28 OECD countries, including the U.S., over the time period from 2001 through 2016. Parameter estimates for Internet usage across the models are found to be positive, albeit with low statistical support. Based on a unique historical survey data set for the U.S. that separates Internet use at home from the use at work, a descriptive analysis for the U.S. suggests that growth of Internet use at work lowers productivity growth.