Keywords
ict diffusion, total factor productivity, investment specific technological change
Start Date
1-7-2008 12:00 AM
Abstract
We compare measures of total factor productivity (TFP) to independentmeasures of ICT diffusion and technological change in New Zealand and a collection ofOECD countries. The measures of technological change are investment quality (investmentspecific technological change or IST) and direct measures of ICT diffusion available inaggregate and in the industrial data for New Zealand. TFP growth is generally uncorrelatedand sometimes negatively correlated with the independent measures of technologicalchange. These findings are consistent with two views. First that TFP is not a measure oftechnological change but ideally (often not operationally) is a measure of free lunchesassociated with such change. Second, that the productivity bonuses from technologicalchange usually occur with significant temporal lags. Thus, TFP is not a contemporaneousmeasure of the free lunches from technological change. We conclude that New Zealand isexperiencing a similar growth phenomenon to that of many other OECD economies. Thegeneral purpose technology of electronic ICT has been diffusing since the mid- - 1970’sthrough a costly investment process that requires many complementary investments toexploit the economic potential of this GPT and the productivity benefits are only recentlyemerging in most cases. We also conclude that the recent low productivity growth in NewZealand is not necessarily cause for alarm from policy makers. This is because NewZealand like many other OECD economies is investing in technology that has a potentiallyhigh future output payoff even if it is not measurable in the TFP statistic.
ICT Diffusion and Productivity in OECD Economies and New Zealand’s Industrial Sectors
We compare measures of total factor productivity (TFP) to independentmeasures of ICT diffusion and technological change in New Zealand and a collection ofOECD countries. The measures of technological change are investment quality (investmentspecific technological change or IST) and direct measures of ICT diffusion available inaggregate and in the industrial data for New Zealand. TFP growth is generally uncorrelatedand sometimes negatively correlated with the independent measures of technologicalchange. These findings are consistent with two views. First that TFP is not a measure oftechnological change but ideally (often not operationally) is a measure of free lunchesassociated with such change. Second, that the productivity bonuses from technologicalchange usually occur with significant temporal lags. Thus, TFP is not a contemporaneousmeasure of the free lunches from technological change. We conclude that New Zealand isexperiencing a similar growth phenomenon to that of many other OECD economies. Thegeneral purpose technology of electronic ICT has been diffusing since the mid- - 1970’sthrough a costly investment process that requires many complementary investments toexploit the economic potential of this GPT and the productivity benefits are only recentlyemerging in most cases. We also conclude that the recent low productivity growth in NewZealand is not necessarily cause for alarm from policy makers. This is because NewZealand like many other OECD economies is investing in technology that has a potentiallyhigh future output payoff even if it is not measurable in the TFP statistic.
