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The Economics of the Digital Society

Edited by Luc Soete and Bas ter Weel

This important book presents a unique body of research into the economics of the digital society. It questions how modern economies have been transformed as a result of digital goods and markets, and explores the policy implications and challenges of this revolution.
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Chapter 13: The impact of ICT investment on knowledge accumulation and economic growth

Adriaan van Zon and Joan Muysken


* Adriaan van Zon and Joan Muysken 13.1 INTRODUCTION Ever since Solow’s observation that computers are everywhere except in productivity data, people have been concerned about the apparent inability of ICT to live up to its productivity promises. However, the wide scope for application of ICT, specifically in data and signal processing, and more generally in organising and streamlining the way we do business and live our lives, suggests that ICT is essentially a general purpose technology (GPT). The GPT literature has provided a compelling story of why, after the advent of a drastic innovation, productivity growth may seriously fall behind expectations. In fact, most GPT papers suggest a slump in growth after the arrival of a technological breakthrough because of the redirection of R&D efforts needed to extend the new technology to make it more profitable to be adopted by its prospective users (Helpman and Trajtenberg, 1998; Greenwood and Jovanovic, 2000; David, 2000). It should not come as a big surprise then that it takes time before the full impact of ICT on productivity growth may be felt, since there are all kinds of adjustment problems to be dealt with first (Kiley, 1999). But now there is evidence that the impact is indeed building up, certainly so in the US (Oliner and Sichel, 2000; Stiroh, 2002), even though the measurement of total factor productivity (TFP) and the contribution of ICT is fraught with difficulties – see Jorgenson (2001) for a survey. The question that immediately arises is:...

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