Abstract

What accounts for the exceptional TFP growth performance in some ICT-using industries after the mid-1990s in the USA and some other OECD countries? Productivity gains in the production of ICT are given as the answer. But technical progress in upstream industries, in general, should not raise TFP growth in downstream industries. This article investigates two explanations for this apparent puzzle: the existence of intangible capital and the externalities of ICT investment. Using newly constructed comprehensive data covering 16 OECD countries for 24 industries for a period of 32 years, I find evidence of intangible capital accumulation, but no evidence of positive spillovers from ICT use. Results show that what would have considered as a perfect case of spillovers from ICT use under conventional method is the impact of R&D and other intangible capital. Once these two channels are accounted for in the model, neither domestic nor foreign ICT spillovers exist.

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