Quantifying the Impact of ICT Capital on Output Growth: A Heterogeneous Dynamic Panel Approach

Using industry data for the United States and the United Kingdom, we provide new evidence on the impact of information and communications technology (ICT) capital on real output growth. The traditional industry panel data analysis fails to find a positive contribution. We argue that this is due to heterogeneity across industries, particularly in the time dimension. Pooling the data for the two countries and using a dynamic panel data estimation method yield a positive and significant effect of ICT on output growth. Individual country estimates suggest a strong impact in the United States, while results are less conclusive in the United Kingdom.

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