Investigating the effects of ICT, education, and R&D on economic efficiency and technology heterogeneity: A cross-country analysis

Abstract

This study explores the impact of information and communication technology (ICT), education, and research and development (R&D) on countries' economic efficiency and technology heterogeneity. A panel of 52 countries, classified into developed (31 sample countries) and developing (21 sample countries) during 2011–2019, were the data sources for the analysis. We obtained relative country-level economic efficiency and technology gap inefficiency estimates from a novel Bayesian data envelopment analysis (DEA) approach. Bias-corrected estimates yielded by this technique have proven to be valid. We then regressed the estimates on ICT, education, and R&D proxy variables using a two-step and an iterative generalized method of moments (GMM) for linear dynamic panel data. Our analysis mitigates possible feedback effects between the explanatory and response variables, as well as possible endogeneity. The novelty of this work goes beyond the use of a new data analysis technique, investigating the impact of the three factors mentioned above and the country classification on technology heterogeneity caused by differences in countries' market structures, regulatory frameworks, economic and knowledge ecosystems, and cultures. Based on this study's findings, fixed broadband subscriptions have the most significant effect on economic efficiency improvement, while R&D is the main driver for reducing technology gap inefficiency. Specifically, ICT-facilitated knowledge spillovers within and across country groups through R&D cooperation play a significant positive role in closing the technology gap. This finding is consistent with the catch-up theory.