Weak ICT Investment in Canada and the United States: The Role of Cloud Computing

Myeongwan Kim

No 2018-04, CSLS Research Reports from Centre for the Study of Living Standards

Abstract: After robust growth in ICT investment in Canada and the United States during the 1980s and 1990s, growth in ICT investment started to slow after 2000 and its share in GDP entered a downward trajectory. In an increasingly digitalized economy, weak ICT investment seems puzzling. To explain this trend, this report focuses on two facets of the changing ICT spending pattern driven by the rise in cloud computing starting in the mid-2000s. Instead of investing in ICT capital goods, organizations now purchase cloud services from cloud service providers that appear to be more efficient in producing computing services. Second, cloud service providers undertake substantial own-account investment in ICT equipment which is not counted in official statistics. Based on input-output tables, we find that the impact of cloud computing on the ICT spending pattern is potentially substantial: during the 2006-2014 period, the purchase of cloud services rose at an annual rate of 25.3 per cent to reach $2,554 million CAD in Canada and at an annual rate of 20.4 per cent to reach $32.1 billion USD in the United States. During this period, adding ownaccount ICT equipment investment by the IT service sector results in additional 1.71 percentage-points in annual growth for nominal ICT investment in Canada and additional 1.12 percentage-points in the United States.

Keywords: ICT investment; cloud computing; Canada; United States; own-account investment; input-output tables; digital economy; technology investment (search for similar items in EconPapers)
Date: 2018-08
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