An Investment Effect from ICT-Using Industries through Capital Deepening

Investment in digital technology takes place through spending on ICT and telecom hardware, software, networks, databases, and user platforms across the economy. As documented above, the investment effects from ICT in Europe had already slowed during the ten years before the 2008-9 crisis, and have only declined moderately further since 2008. Table 1.2 shows that the ICT contribution (including investment in spectrum) to growth was 0.44 percentage points from 2001 to 2007 and 0.21 percentage points from 2008 to 2011, slightly lower than the aggregate ICT investment effect in Table 1.2 for 2008-14.

While positive for labour productivity growth, ICT investment does not necessarily lead to greater efficiency in the economy, as measured by TFP growth. Investment booms in new technology can temporarily cause a slowdown or even a decline in TFP (Base, Fernald, and Shapiro, 2001). Changing degrees of utilization of the new capital installed, especially after the creation of new networks, can impact significantly on productivity.

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