Clusters and Economic Growth in Asia
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Clusters and Economic Growth in Asia

Edited by Sören Eriksson

This detailed book explores and provides insights into the development and transformation of various clusters, economies and industrial sectors in East and Southeast Asia.
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Chapter 2: Information and communication technology and economic growth of four Asian industrialized economies

Yanfei Li and Wai-Mun Chia


There has been a widespread debate among economists about the role of information and communication technology (ICT) in economic growth since the late 1990s, especially in the progress of the New Economy in the USA. Despite the Solow Paradox,1 it is generally agreed that ICT production and application have been a major force of economic growth in the USA since 1995 (Jorgenson and Stiroh, 1999, 2000; Oliner and Sichel, 2000; Jorgenson, 2001). Additionally, much effort has been devoted to investigating why the European countries generally lagged behind in utilizing ICT to promote growth performance in terms of real GDP and labour productivity growth, as well as why ICT investment in the USA declined but labour productivity growth continued to accelerate after the year 2000 (Gordon, 2004). The literature has suggested that the promotion of growth performance by ICT does not happen automatically. Rather, it is conditional on many factors including organizational innovation/ investment (Brynjolffson and Hitt, 2000) and sequential complementary innovations for ICT as a general purpose technology (GPT) (Helpman and Trajtenberg, 1996; Basu et al., 2003), as well as sufficient high-skill labour to apply ICT (Basu et al., 2003). It is also found that those service industries (mainly wholesale trade, retail trade, finance and insurance) that invest heavily in ICT are the major non-ICT-producing industries that contributed to the late 1990s’ labour productivity acceleration in the USA (Jorgenson et al., 2002; Stiroh, 2002).

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