The Role of ICT in the World Economy

Information and communications technology

Information and communications technology: Review of the ICT Literature

Information and communications technology: Investment in ICT and Its Diffusion

Information and communications technology: The Effects of ICT on Economic Growth

Information and communications technology: New Economy and the Productivity Paradox

The OECD(2004) report on the impact of ICTprovides two important messages. First, ICT continued to have a strong impact on performance. Productivity growth in the United States, the main example of ICT-led growth and productivity improvements, continued to be strong. ICT networks had spread throughout much of the OECD business sector and would spread further to enhance business performance. The release of increasingly powerful microprocessors was projected to continue for the foreseeable future. These factors were expected to encourage ICT investment and support further productivity growth.

Second, the impact of ICT differed markedly across OECD economies. Many OECD countries lagged in the diffusion of ICT and had scope for greater uptake. It was expected that the largest economic benefits of ICT would be observed in countries with high levels of ICT diffusion. Having the equipment or network is not sufficient to derive economic benefits, however. Other factors, such as the regulatory environment, skills, ability to change organizational setups, and the strength of innovations in ICTapplications all affect the ability of firms to seize the benefits of ICT. Consequently, the impact of ICTon economic growthand performance of countries with equal ICT diffusion will not be the same.

IT makes a positive although small contribution to economic growth, but its impact is positively related to the level of development. Studies of the relationships between IT and economic performance suggest that the impact of IT diffusion can differ even among developed countries with similar level of development. The limited existing empirical evidence shows that developing counties that did not adopt complementary policies have gained little benefit from IT investment. In general, for developing countries it is rather difficult to catch any systematic evidence about such relationships. While the evidence suggests that IT contributes to the growth of developed countries, this relationship is less clear in the case of developing countries.

A long time period is required to link IT investment to economic growth and establish a causal relationship between the two. For IT to be effective, its spread needs to reach a critical threshold. To obtain high returns from IT investment, developing countries must adopt complementary policies that fulfill conditions for economic development such as building up the basic infrastructure, creating a nonmonopoly telecommunicationsmarket, opening the market, enacting effective laws and regulations, and building a high-quality educational system. For developing countries, diffusion and application of IT can play an important role in the growth of the economy, but for IT to have a full impact, more fundamental complementary investments are essential.