The ICT Sector, Growth and Productivity: Ireland and Australia Compared

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Introduction

Among OECD economies, Ireland and Australia stand out for high productivity, high GDP and high employment growth over the 1990s. For both economies, information and communications technology (ICT) has been an important contributor to these outcomes, inducing technological change, raising skulls, deepening capital and augmenting labour. In this article, we review the comparative growth and productivity performance of both countries in terms of the contribution of the ICT sector. However, there is a major difference in the way this contribution has occurred in each of these countries, reflecting a pattern emerging across the OECD, and we assess the significance of this difference.

Whereas Ireland has presided over substantial direct investment in its ICT sector during the 1990s, especially in computer hardware manufacturing, Australia is a net importer of ICT products and services. For Ireland, this has meant a growing number of ICT related jobs and rapid growth in ICT related exports; Ireland is now the world's fifth largest exporter of computer hardware, primarily to the European market. For Australia, the result is a growing trade deficit in ICT and relatively few direct ICT production related jobs. The investment in ICT in Australia is more related to applications of ICT across industry, rather than the ICT sector itself, with significant indirect productivity enhancing effects; in Ireland the investment in ICT is more production orientated, and is increasingly supplemented by investment in the software sector. By the end of the 1990s, Ireland was remarkably the biggest exporter of software in the world, and while much of this was localization activity by US multinationals, it also proved to be a catalyst for the development of an indigenous software industry.

The contrast between the role of ICT in Ireland and Australia is matched by institutional and policy differences. Ireland pursued an active and strategic industry policy, linking foreign investment attraction directly to the development of ICT based clusters and regional synergies, most recently in the context of the European Union (EU) commitment to become "the most competitive and dynamic knowledge-based economy in the world by 2010" (EU, 2000). In the main, Australia has shunned national industry policies in favour of a market based approach to industry development based on what it calls getting the "fundamentals" right. Nevertheless, some state governments have active programmes to encourage industry location within states, but this applies to locating new and established industries. Unlike Ireland, developing industry clusters and regional synergies has not been part of the Australian industry development strategy. In this article, we explore the contribution and development of the ICT sectors in both countries, especially in relation to the growth and productivity record of the 1990s.

ICT Sector--What is It? Can it be Measured?

Information and communications technology includes computers, add-ons and peripherals such as modems, communication networks, software applications and other electronic communication systems including mobile phones. ICT is so extensive it touches upon almost every household, every school and university, every government agency and every business. The ICT sector is more than computers--it includes communication systems, systems of data storage and retrieval and software systems for recreation, business and research. One characteristic of the ICT sector is that it permeates every other sector and almost every transaction in the economy. That is, there are strong network effects and external synergies associated with a growing ICT sector. It affects how work is carried out, how business is conducted and even leisure activities.

The ICT sector is more than the number of people employed in manufacturing computers, in telcos and in software companies. It is more than the total investment in new computers, network systems and software. …