Productivity, network effects and telecommunications capital: Evidence from the US and Europe
File(s)
Author(s)
Goodridge, Peter
Haskel, Jonathan
Edquist, Harald Olof
Type
Working Paper
Abstract
Did the huge investment in telecommunications networks in the 1990s affect subsequent total factor productivity? Using data from 13 European countries and the US, 1995-2013, we document the substan- tial growth and then slowdown in "telecommunications" capital and ask if this is related to the growth and slowdown in TFP. We explore this by disaggregating ICT equipment investment into "IT" and "CT" equipment investment. We test for distinct effects from each using a simple framework where CT cap- ital has network externalities and so potentially impacts TFP, with the marginal impact of CT capital growth being higher in countries spending more on renting CT capital. We find: a) evidence of a robust correlation between (lagged) growth in (rental share-weighted) CT capital services and TFP growth; b) the estimated externality from CT capital potentially explains around 30-40% of TFP growth in North European countries, 60% in Scandinavia and around 90% in the US; c) CT capital has a social return around five times its private return; and d) a slowdown in the accumulation of CT capital accounts for just over half of the post-2003 TFP slowdown in the US but only one-tenth of the TFP slowdown in the EU
Date Issued
2019-08
Citation
2019
Publisher
Centre for Economic Policy Research (C.E.P.R Discussion papers)
Copyright Statement
© 2019 The Authors.
Sponsor
Economic & Social Research Council (ESRC)
Ericsson Enterprise AB
Ericsson Enterprise AB
Identifier
https://ideas.repec.org/p/cpr/ceprdp/13910.html
Grant Number
ES/M500562/1
9400628052
n/a
Subjects
spillovers
network effects
telecommunications
ICT
R&D
externalities
growth
TFP
Notes
Source info: CEPR Discussion Paper No. DP13910
Publication Status
Published