Measuring ICT capital and estimating its impact on firm productivity

This paper provides a comparative analysis of the impacts of information and communication technology (ICT) on firm labour productivity among firms in Manufacturing and Services, as well as among firms in different service industries. For this purpose I use a rich employer–employee panel data set of Norwegian firms covering the period 2002–2006. The analytical framework is based on different specifications of the firm–level production function. The results are consistent with ICT having a positive impact on firm labour productivity. Accounting for labour heterogeneity, i.e., for different skills of the workers, provides evidence on complementarities between ICT and the use of high-skilled employees. The results also indicate considerable differences between firms in Manufacturing and Services and between firms in different service industries with respect to productivity effects of ICT, non–ICT and human capital and with respect to the gain of joint use of ICT and high-skilled workers.

Acknowledgement: I am grateful to Erik Biørn, Jarle Møen, Terje Skjerpen and participants at the 2009 Norwegian National Economists Meeting (Bergen) for interesting discussions and many helpful comments. This paper was written as a part of the research project 'Effects of ICT on firm productivity' with financial support from the Ministry of Government Administration and Reform.