Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2004:13: Human capital is the key to the IT productivity paradox

Gudmundur Gunnarsson (), Erik Mellander () and Eleni Savvidou ()
Additional contact information
Gudmundur Gunnarsson: Mälardalen University, Dept of Business Adminstration and Information Systems, Postal: P.O. Box 883, SE-721 23 Västerås, Sweden
Erik Mellander: IFAU - Insitute for Labour Market Policy Evaluation, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Eleni Savvidou: Uppsala University, Dept of Economics, Postal: P O Box 513, SE-751 20 Uppsala, Sweden

Abstract: Unlike previous analysis, we consider (i) possible externalities in the use of IT and (ii) IT and human capital interactions. Examining, hypothetically, the statistical consequences of erroneously disregarding (i) and (ii) we shed light on the small or negative growth effects found in early studies of the effects of IT on productivity growth, as well as the positive impacts reported more recently. Our empirical analysis uses a 14-industry panel for Swedish manufacturing 1986–95. We find that human capital developments made the average effect of IT essentially zero in 1986 and steadily increasing thereafter, and, also, generated large differences in growth effects across industries.

Keywords: IT productivity paradox; applied econometrics

JEL-codes: L23; L60; O33

60 pages, October 4, 2004

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