Academic journal article Review of European Studies

A Non-Parametric Analysis of Convergence in ICT Industries

Academic journal article Review of European Studies

A Non-Parametric Analysis of Convergence in ICT Industries

Article excerpt

Abstract

The purpose of this article is to explore the relative merits of capital accumulation and efficiency catch-up in the convergence patterns of labor productivity in theICT (Information and Communication Technologies) sector in a set of developed countries. It is the first convergence analysis of ICT carried out from the non-parametric kernel approach and using an intertemporal data envelopment analysis (DEA) to estimate the efficiency of the analyzed countries. Special care has been paid to the dataset construction, using hedonic prices and unit value ratios because of the nature of the industry. The appropriate technology theory extended with non-immediate spillovers is the theoretical framework used to interpret the obtained results. These show thatlabor productivity, technology and efficiency have moved from a unimodal towards a bimodal distribution over time, beginning the 21th century with two convergence clubs of countries. The conclusions obtained from these results show that while capital intensification offer opportunities to benefit from new knowledge developed by the leaders, assimilation of this knowledge is not immediate and its speed depends upon the social and technological capabilities of the followers. Policy decision-makers should be aware that the choice of the technology has to be complemented with the development of other actives to benefit from all its potentialities.

Keywords: ICT, labor productivity, hedonic prices, convergence clubs, DEA, kernel

1. Introduction

1.1. The Problem: Relevance and Contribution to the Previous Literature

Both the so-called fifth technological wave and the ¡§new economy¡ the former has given rise to are supported by Information and Communication Technologies (Note 1). This ¡§new economy¡ which has proven its capacity to improve productivity, economic growth and peoples¡| living conditions results from structural transformations taking place in production networks and society as a consequence of the increasing, extended and intense application of new technologies. This technology wave has a micro-electronic basis and can be exemplified mainly through the application of ICT to economic processes and social customs.

According to the OECD (2003), these technologies influence growth through three main channels, namely: 1) rapid productivity growth in ICT manufacturing and the increasing size of these industries; 2) intensification of investment in equipment, incorporating information and communication technologies, and subsequent improvement in labor productivity; and 3) spillover effects on productivity generated by these technologies.

In view of the relevance of ICTs, the aim of this article is analysing the convergence paths in the ICT industry during the last two decades of the 20th century (1979-2001) in a set of developed countries (Canada, Finland, France, Italy, Spain and USA). The extension of the sample is limited by the availability of accurate data and the aim of correctly measuring productivity and having an actually homogeneous sample in terms of the methodology of the measurement of variables.

At the end of the 1980s there appeared several relevant contributions within the neoclassical model of the evolution of productivity and income per capita by countries (Abramovitz, 1986; Baumol, 1986; Baumol& Wolff, 1988; Dowrick & Nguyen, 1989). The interest in country convergence re-emerged in the 1990s following the introduction of new concepts such as ¡§£m convergence¡, ¡§£] convergence¡ and ¡§convergence clubs¡.

Theoretical and empirical contributions generated a prolific debate on convergence following the contribution of Barro and Sala-i-Martin (1991, 1992 and 1995). Finally, two positions can be differentiated: while neoclassical models consider that disparities will tend to be reduced or even eliminated in the long run, endogenous growth theories show that disparities may continue, due to certain institutional factors. …

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