ICT Capital and MFP Growth: Evidence from Canadian and U.S. Industries

What affects MFP in the long-run? Evidence from Canadian industries

“…They do not …nd, however, any evidence that supports ICT intensity as a determinant of MFP growth in either country. This result could be due to the fact that only the contemporaneous relationship between ICT and MFP is studied in Rao et al (2007). As suggested in Leung (2004) and a number of international studies, there could be lags in the relationship between ICT and MFP.…”

“…4 Moreover, disruption costs associated with installing a new type of capital may even have an initial negative e¤ect on MFP in the short-run. The negative …nding of Rao et al (2007) could also be due to the fact that they give each industry the same weight in their regressions. It could be the case that there are some industries where the changes in MFP are particularly di¢ cult to explain, such as the long-term declines in MFP observed in some service industries.…”

“…As a general purpose technology, ICT is believed to have made possible changes in organizational structures that have raised MFP. 3 Despite this attention, studies of the Canadian experience have been limited to Leung (2004) and Rao et al (2007). Using aggregate data, Leung (2004) …nds that growth in computer investment has a positive, but lagged e¤ect on MFP growth.…”

“…Still, most evidence of the e¤ect of ICT on MFP is for the U.S. where the investment in ICT started the earliest and has been the strongest. Rao et al (2007) use industry-level panel data similar to those used in this paper and corresponding U.S. data to study the impact of the degree of ICT capital intensity (stock per worker) on MFP growth. They do not …nd, however, any evidence that supports ICT intensity as a determinant of MFP growth in either country.…”

“…First, it is one of the few studies for Canada that investigate ICT's potential impact on MFP at the aggregate or industry level. While there is a growing body of research for the United States and the United Kingdom, Canadian studies are limited to Leung (2004) and Rao et al (2007). 2 Second, most studies tend not to be comprehensive, but rather one or two determinants are examined at a time in each study.…”