Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 551: Is Human Capital the Key to the IT Productivity Paradox?

Erik Mellander (), Eleni Savvidiou () and Gudmundur Gunnarsson ()
Additional contact information
Erik Mellander: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Eleni Savvidiou: Uppsala University, Postal: Department of Economics , P.O. Box 513, SE-751 20 Uppsala, Sweden
Gudmundur Gunnarsson: Mälardalen's University College, Postal: Department of Business Administration and Informatics, P.O. Box 883, SE-721 23 Västerås, Sweden

Abstract: Unlike previous analyses, we consider (i) that IT may affect productivity growth both directly and indirectly, through human capital interactions, and (ii) possible externalities in the use of IT. Examining, hypothetically, the statistical consequences of erroneously disregarding (i) and (ii) we shed light on the small or negative growth effects found in early U.S. studies, as well as the positive impacts reported 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-human Capital Complementarity; New Growth Theory; Applied Econometrics

JEL-codes: D24; J24; L60

48 pages, February 27, 2001

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