The Impact of ICTs and Digitalization on Productivity and Labor Share: Evidence from French firms

Abstract

Taking advantage of an original firm-level survey carried out by the Banque de France, we empirically investigate how the employment of ICT specialists (in-house and external) and the use of digital technologies (cloud and big data) have an impact on firm productivity and labor share. Our analysis relies on the survey responses in 2018 of 1,065 French firms belonging to the manufacturing sector and with at least 20 employees. To tackle potential endogeneity issues, we adopt an instrumental variable approach as proposed by Bartik (1991). The results of our crosssection estimations point to a large effect: ceteris paribus, the employment of ICT specialists and the use of digital technologies improve a firm's labor productivity by about 23% and its total factor productivity by about 17%. Conversely, the employment of in-house ICT specialists and the use of big data both have a detrimental impact on labor share, of about 2.5 percentage points respectively.

Digitalization and Productivity: Evidence from EU Manufacturing Sector

“…Studies have found that the use of digital technology by various companies is associated with higher labour productivity and firm growth (Clarke et al, 2015). Cette et al (2021) investigated impact of information communication technology (ICT) and digitalization on total factor and labour productivity. Their find out that the employment of ICT specialists and the use of digital technologies improves firms labour productivity by 23% and its total factor productivity by about 17%.…”

“…In their study they used Brazilian industry data of year 2016 of 27 industrial sector and 2225 companies. Cette et al (2021) relied on analysis of survey in 2018 of 1065 French firms belonging to manufacturing sector with at least 20 employees. So, all the studies before on digitalization impact been done for limited target year and specific country.…”

“…In the study was used ordinary least square regression. Cette et al (2021) empirically investigate how the use of cloud and big data have an impact on firm productivity and labor share. To address this issue, we will cover whole digitalization on company level, not segregate the technology in use.…”

“…Only few research papers focus on the impact of digitalization on productivity, and those that do, mainly concern specific digital technology (Cette et al, 2021) or have very narrow exclusive set of data. Horvat et al (2019) investigated impact of automation and digitalization on manufacturing companies labour productivity in early stage of Industry 4.…”

“…Digitalization is often seen as the potential source of huge productivity increase, hence over the last decade productivity grow declined in most countries, regardless of its distance to technological frontier (Cette et al, 2021). Despite of continuously increasing investment to digitalization, productivity grow show no notable increase (Gebauer et al, 2020, Kohtamaki et al, 2020, Pinsonneault & Rivard, 1998.…”