Productivity Surge and ICT investments
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Transcript of Productivity Surge and ICT investments
Benchmarking Efficiency of Telecommunication Industries in the US and Major European Countries A Stochastic Possibility Frontiers Approach byGeorg ErberFirst Transatlantic Telecom Industry Forum, IDATE, Montpellier November 22, 2005
22 November 2005Author Georg Erber 2
Productivity Surge and ICT investments
– US in the mid 1990s experienced a strong recovery of productivity, in labour as well as in total factor productivity (TFP)
– One key factor always expected to have been underestimated were substantial ICT investments
22 November 2005Author Georg Erber 3
Key drivers in communication
– Standardization in data communication via the IP-protocol
– Broadband revolution
– Convergence in networks, All-IP-networks
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– Mobile and in general wireless communication Leads to ubiquous communication and computation
– No end currently insight of a great transformation how production processes are organized
– ICT as a key driver in globalization
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Methodological Framework
– Standard Method:
Growth Accounting Approach
– Alternative Method:
Production Possibility Frontiers
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The Inefficiency Hypothesis
– Inefficient use is an important factor
– Anecdotal evidence: Huge investments in ICT project failed, e.g. UMTS or TollCollect
– Microdata show a high dispersion of ICT productivity
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Potential Complementary Factors
– ICT-Capital/ICT-Skill-Complementarity
– Internally in the firm, ICT-based company organization
– Externally in the supply and value chain, transaction cost based global value chains
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A first step in efficiency/inefficiency analysis
– A production possibility set, feasib´le solutions
– A production possibility frontier is the outer boundary of production possibility set, i.e. it is the location of the maximum output attainable with a given amount of factor inputs
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Production Possibility Frontiers
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Choosing a probability distribution for the inefficiency random variable
– Our analysis currently assumes a truncated normal distribution for the inefficiency shocks
– Estimation method is Maximum-Likelihood-Estimation which gives consistent and asymptotically efficient parameter estimates
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Truncated Normal Densities
0.0
0.5
1.0
1.5
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0 1 2 3 4 5 6
µ = -2 µ = -1 µ = 0 µ = 1 µ = 2
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Measuring Inefficiency at the country and industry level
– Annual data from 1979-2001– Countries included (US, Germany, UK,
France, Netherlands plus the aggregate of the four EU countries, EU4)
– Input Factors included (Labour, Labour quality, ICT capital stock, non-ICT capital stock)
– Output: value added
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J-Curves of Adoption with Phase Delay
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Country A Country B
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Relative Efficiency Ratio ofCountry A to Country B
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Cobb-Douglas-Function with Harrod-neutral technological Progress
1981 - 2002
2 Cf. Battese, Coelli (1995), Erber (2005).
Source: GGDC, Calculations of the DIW Berlin.DIW Berlin 2005
Development of Inefficiency1 in the Telecommunication Industries in the US and selected EU-
Countries, Technological Efficiency Effects2
1 If the value is equal to unity total efficiency for a country is accomplished. Values below unity determine the distance of the country from the stochastic possibility frontier, SP F.
0.600
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81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02
USGermanyUKFranceNetherlandsEU4
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Cobb-Douglas-Funktion mit Harrod-neutralem technischen Fortschritt
1981 - 2002
2 Cf. Battese, Coelli (1995), Erber (2005).
Source: GGDC, Calculations of the DIW Berlin.DIW Berlin 2005
Development of Inefficiency-Gaps1 in the Telecommunication Industries in Germany relative to the
US and selected EU-countries, Technological Efficiency Effects2
1 If values are equal to 100 total efficiency/inefficiency equality between Gemany and the other countries prevail. Values below 100 denote an inefficiency-gap of Germany relative to the other country. Value above 100 denote an efficiency-advantage relati
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81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02
relative to the US
relative to ther UKrelative to France
relative to the Netherlands
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Conclusions
– Using time-varying methods a ranking in 2001 is:
– 1. Netherlands
– 2. UK
– 3. France
– 4. Germany
– 5. US
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Conclusions
– All countries show a J-curve of adoption of two major innovations in telecommunication: deregulation of TK-markets and the Internet
– Phase delays show that the following sequence:
– 1. US (1993), 2. UK (1994), 3. Netherlands (1996), 4. France (1997), 5. Germany (1999)