Examining the TFP growth of information technology service sector: a cross-country analysis

Haoliang Zhu () and Jiao Wang ()
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Haoliang Zhu: Doshisha University
Jiao Wang: Doshisha University

Economics Bulletin, 2022, vol. 42, issue 2, 740 - 752

Abstract: This paper aims to estimate the total factor productivity (TFP) growth of the information technology (IT) service industry and quantify the factors that affect TFP growth. It analyzes the IT service industry panel data of 42 economies from 2000 to 2014. TFP growth is decomposed into technical change (TC), scale component (Scale), and technical efficiency change (TEC). Furthermore, the sources of technical change are quantified by a time trend and observable technological shifters. The former is measured using a time trend variable, whereas the latter is captured using external factors, such as the share of foreign value-added in final outputs (FVS), which indicates how the IT industry relies on international outsourcing. Our results show that the average TFP growth rates of the IT service industry experienced an overall upward trend during the sample period. We found that the rise of TEC significantly contributed to TFP growth during 2000-2007. Moreover, the improvement of TC measured by inputs and FVS made a noticeable contribution to TFP growth during 2008-2014.

Keywords: total factor productivity; international outsourcing; technical change; JEL Category : D24; O47; F14 (search for similar items in EconPapers)
JEL-codes: D2 O4 (search for similar items in EconPapers)
Date: 2022-06-30
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