Total Factor Productivity, Demographic Traits and ICT: Empirical Analysis for Asia

Abstract

This paper advances a model to explain the total factor productivity in Asian countries, most of which are labor surplus and are endowed with substantial human capital. Such promising demographic potentials are considered as complementary factors to use of Information and Communication Technology (ICT). Population with such favorable demographic traits and access to ICT results in higher Total factor productivity (TFP). We call this as Demo-Tech-TFP Model and is tested by using data for 2000-2010 of 24 Asian countries. Econometric concerns like presence of endogenous and/or predetermined covariates and small time-series and cross-sectional dimensions of panel dataset are tackled by using System Generalized Method of Moments (SYS-GMM). Results show considerable support for the Demo-Tech-TFP hypothesis. Need is to design such models that suit the local demography and patterns of technological diffusion currently taking place in developing countries.Keywords: Information and communication technology (ICT), Total Factor Productivity (TFP), Demographic features, Generalized Method of MomentsIntroductionFrom pre-historic times man has under- taken to store, recollect, and process infor- mation as a source of value. Starting from image carving in stone walls to today's digi- tal technology, the information is handled in a number of ways [24]. The ICT revolution is crucial insofar as it involves technologies geared to the production and dissemination of knowledge and information. These new technologies, that first emerged in the 1950s and then really took off with the advent of the Internet, have breath-taking potential [15]. ICT has affected agriculture, industry and services sectors of economies world over like no other technology in past [2]. Terms like information economy, digital economy, e-economy, weightless economy, paperless economy have been floated over the last 3 decades to term this readily evolving kind of economy. For instance, one of the pioneering works in this regard was a report by [35]. Later, during mid-90s term 'New Economy' was introduced to represent the marvelous growth in software industry in US.In his famous treatise, 'Major Economic Cy- cles', [30] has pointed out the existence of tides of surging economic activity. These economic cycles are called as 'Kondratiev Waves'. There is growing consensus that the rise of 'New economy' during 1990s and the burst of the 'dotcom' bubble in 2001 can be the 5th Kondratiev Wave and the stimulus behind it is ICT [30].2 ICT in Asian RegionAsia as one of the densely populated regions of the world has shown high demand for ICT products after the falling prices of ICT equipment during the last quarter of 20th cen- tury. Policy reforms of deregulation and pri- vatization in Asian countries like India, Paki- stan, China and Indonesia and has enabled the spread of ICT [39].A dataset of 24 countries is included in em- pirical analysis for the time span 2000-2010 depending on the availability of data. The chosen indicators are fixed broadband inter- net subscribers (FBBS), fixed internet sub- scribers per 100 inhabitants (FIS), internet users per 100 inhabitants (INTU), fixed tele- phone lines per 100 inhabitants (FTL), in- formation & communication technology maturation index (ICTMI), internet users per 100 inhabitants (INTU) and mobile cellular telephone subscriptions per 100 inhabitants (MBLC). ICTMI (Information and Commu- nication Technology Maturation Index) is in- spired from Information and Communication Development Index (IDI) in [42] 'Measuring Information Society' published by Interna- tional Telecommunication Union (ITU).3 Literature SurveyStudies at macroeconomics level showing the impact of demographic factors and ICT on TFP are, to our knowledge, scarce. [20] ex- plore the ICT-productivity relationship in Spanish firms. Their innovation was to intro- duce a set of organizational variables (work- ers' qualifications, management attitude and process innovation) which would support the ICT to have its impact on organizational productivity. …