ICT Diffusion and Growth: An Empirical Analysis

This study uses data on ICT diffusion from the Groningen Growth and Development Centre to study the effects of ICT diffusion on per-capita growth for the U.S. and 14 European Countries. We assume that the level of diffusion of ICT capital and its rate of change (measured by the share of ICT capital over total capital and by its rate of change) are proxies for the existing level and rate of change of technological progress. Hence we estimate a Solow type exogenous growth model with human capital, trying to verify whether there is evidence of positive effects of ICT diffusion on the growth performance. We find evidence in favour of a positive relationship between growth and output per-capita (as shown in various papers that adopt a growth accounting methodology) and we also find that, using GMM estimation and controlling for the ICT component of technological change, the coefficient capturing the rate of convergence is much higher than usually found, hence showing that countries spend most of their time close enough to their steady states.