(Luận văn) the contribution of information and communication technologies investment on economic growth

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE t to ng VIETNAM THE NETHERLANDS hi ep w VIETNAM - NETHERLANDS n lo ad PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS ju y th yi pl n ua al va n THE CONTRIBUTION OF INFORMATION AND COMMUNICATION TECHNOLOGIES INVESTMENT ON ECONOMIC GROWTH ll fu oi m at nh z z k jm THAN PHUONG LAN ht vb BY om l.c gm MASTER OF ARTS IN DEVELOPMENT ECONOMICS an Lu n va ey t re HO CHI MINH CITY, DECEMBER 2013 UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS t to ng hi ep VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS w n lo ad ju y th yi pl n ua al THE CONTRIBUTION OF INFORMATION AND COMMUNICATION TECHNOLOGIES INVESTMENT ON ECONOMIC GROWTH n va ll fu oi m A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS at nh z z k jm ht vb By Academic Supervisor: n va Assc Prof Dr NGUYEN TRONG HOAI an Lu Assc Prof Dr PHAM HOANG VAN om l.c gm THAN PHUONG LAN ey t re HO CHI MINH CITY, DECEMBER 2013 ACKNOWLEDGEMENTS t to ng Writing process of a thesis is a collaborative experience involving the helps and hi supports from many people I want to express my gratitude to those who give me ep the great support to complete this study w n I am deeply indebted to Associate Professor Doctor Pham Hoang Van, Lecturer at lo ad Department of Economics, Baylor University (USA), Fulbright Scholar, is a super y th supervisor Thanks for his encouragements and useful comments to pursue this ju topic from the initial ideas to the final completion as well as enable me to develop a yi pl deeply understanding on my thesis al n ua Equally, I also wish to express my grateful thanks to Associate Professor Doctor n va Nguyen Trong Hoai, Lecturer at Department of Economics Development, fu University of Economic (HCMC), my second supervisor, for his valuable ll suggestions during the time I write this thesis His wide knowledge, excellent m oi advice and logical way of thinking have provided me a good basis in present this at nh thesis z z Doctor Truong Dang Thuy, Lecturer at Department of Economics Development, vb jm ht University of Economic (HCMC), has provided me many useful comments that help me to improve my academic writing skill as well as critical thinking Thanks k l.c gm for his nice supports and helpful advices Doctor Pham Khanh Nam, Lecturer at Department of Economics Development, om University of Economic (HCMC), has supports me in initial ideas for this thesis and an Lu provides me useful data source that help me a lot to continue this thesis n va By the way, I also would like to express sincere thanks to Anders Halvorsen, Vice ey (WITSA) organization He has provided me the Digital Planet Reports versions t re President, Administration of World Information Technology and Services Alliance 2002, 2004, 2006, 2008 and 2010 that covers all my needed data for ICT spending Without his data, I would not be able to complete my thesis t to ng Equally, I also wish to express my grateful thanks to Dr Vu Minh Khuong, hi ep Assistant Professor Lee Kuan Yew School of Public Policy, National University of Singapore (Singapore) Although very busy with his job, he did give me a lot of w knowledge, data and useful advices for me to solve my problem when I got stuck n lo and complete my thesis ad y th During years at VNP course, lectures and many friends have encouraged, reposed ju yi trust in me and motivated me to overcome all difficulties in learning and my life pl n ua Than Phuong Lan al Thanks for all n va ll fu Dec 2013 oi m at nh z z k jm ht vb om l.c gm an Lu n va ey t re ABSTRACT t to ng Growth accounting method to measure the contribution of Information and hi ep Communication Technologies (ICT) investment on economic growth has widespread in 1990s in the United States and then in many other developed w n countries including Europe, G7 This study extends growth accounting exercise in a lo ad large sample of 32 countries in recent period from 2005 to 2010 Results from this y th study prove that ICT capital investment is a very important factor Although its ju contribution is not largely as non-ICT capital, its share in economic growth is not yi pl small and positive in all countries including developed and developing groups Even ua al in the period after financial crisis in year 2008, ICT investment is recognized a n positive contribution to economic growth in all economies in sample va n Such country-by-country results, however, “are not sufficient to judge how fu ll significant ICT has impacted output growth across economies” as Vu (2005) m oi mentioned Therefore, in my research, I continue to analyze the main channels nh at through which ICT investment influences the economic growth and evaluate its z impacts on each channels By applying regression analysis, this study finds a robust z ht vb and positive statistically significant between ICT capital on output growth and on jm TFP growth through spillovers effects in the full sample of 32 countries, especially k in developing economies group For developed economies, the empirical evidence gm impact on TFP growth through spillovers om l.c of ICT impact on output growth is smaller and even not statistically significant an Lu Finally, an empirical regression model is build in order to find out determinants of variation on the contribution of ICT investment on economic growth in this ey from these variables are smaller in later period of post-2008 t re quality is not statistically significant in period before 2008 However, those impacts n English fluency are the most significant and positively impact although institutional va research Regression results show that education, openness, inward FDI, health and ABBREVIATIONS t to ng hi ep ICT Information and Communication Technologies OLS Ordinary Least Square Instrument Variables w IV n lo Total Factor Productivity ad TFP y th TFPG Total Factor Productivity Growth ju yi FDI Foreign Direct Investment pl al Europe US United States UK United Kingdom G7 Group of Developed Countries: U.S, U.K, France, Germany, n ua EU n va ll fu oi m at nh Italy, Canada and Japan z z Organization for Economic Co-operation and Development WITSA World Information Technology and Services Alliance BEA U.S Bureau of Economic Analysis UNDP United Nations Development Programme k jm ht vb OECD om l.c gm an Lu n va ey t re CONTENTS ACKNOWLEDGEMENTS t to ABSTRACT ng ABBREVIATIONS hi ep Chapter I INTRODUCTION Problem Statement w 1.1 n lo 1.2 Research Questions y th Organization of the Study ju 1.4 ad 1.3 Research Objectives yi Chapter II pl THEORETICAL BACKGROUND al Sources of Economic Growth n ua 2.1 Two Views of Capital 2.1.2 Explaining Sources of Economic Growth n fu ICT and Its Impacts on Economic Growth 11 ll 2.2 va 2.1.1 m Information and Communication Technologies (ICT) 11 2.2.2 Accessing the Channels of Contribution to Growth by ICT 11 at nh 2.3 oi 2.2.1 Measuring the Contribution of ICT Investment to Economic Growth 15 z Approaches for Evaluating the Impacts of ICT on Growth 15 z 2.3.1 vb Empirical Literature 19 k 2.3.3 jm ht 2.3.2 Measuring the Contribution of ICT Investment as a Source of Economic Growth 16 gm om l.c 2.4 Determinants of the Variations in ICT Magnitude Contribute to Economic Growth 33 Chapter III 38 3.1 an Lu RESEARCH METHODOLOGY 38 Estimating ICT and non-ICT Capital services 38 3.1.3 The measurement of ICT Capital Stock using PIM 43 3.1.4 Quantities and User cost of ICT Capital Services 44 ey Real ICT Investment Flows 42 t re 3.1.2 n ICT Investment Flows Calculation 40 va 3.1.1 3.2 Methodology 47 t to 3.2.1 Growth Accounting For Contribution to Economic Growth of ICT Investment 47 ng hi ep 3.2.2 Impacts of ICT on Economic Growth 49 3.2.3 Determinants of ICT Contribution to Growth 54 CHAPTER IV 60 w EMPIRICAL RESULTS AND DISCUSSIONS 60 n lo 4.1 The Contribution of ICT to Economic Growth 60 ad 4.1.1 ICT vs Non-ICT Capital 65 yi The Impacts of ICT Investment to Economic Growth 66 pl 4.2 The Share of ICT Contribution to Output Growth Rate 64 ju 4.1.3 y th 4.1.2 Magnitude of ICT Contribution to Growth 60 al ICT is Capital Input Contribute to Economy Output 66 4.2.2 Spillover effects of ICT Investment on TFP Growth 71 n va Determinants of Variations of ICT Contribution to Economic Growth 74 n 4.3 ua 4.2.1 fu ll CHAPTER V 81 m oi IMPLICATIONS AND CONCLUSIONS 81 Conclusion 81 5.2 Implications 83 5.3 Limitations 86 at nh 5.1 z z vb ht REFERENCES 88 k jm APPENDIX A 96 gm INFORMATION AND COMMUNICATION TECHNOLOGIES (ICT) 96 l.c APPENDIX B 99 om ICT CONTRIBUTION TO ECONOMIC GROWTH (RESULTS OF GROWTH ACCOUNTING METHOD) 99 an Lu n va ey t re LISTS OF FIGURES t to Figure 2.2.1: Contribution of ICT to Economic Growth 14 ng Figure 2.3.1: Share of ICT-Producing Industries in Total Business Sector 20 hi Figure 2.3.2: Output contribution of ICT Production in the Market Sector in Finland 21 ep Figure 2.3.3: Share of TFP Growth of ICT Producing Sector in Total TPF and Labor w Productivity 1995-2000 23 n Figure 2.3.4: Contribution of ICT to Labor Productivity Growth 30 lo ad Figure 3.1.1: Summary for capital services calculation 40 ju y th Figure 4.1.1: Average GDP Growth of 32 Countries in Sample (in %) 61 Figure 4.1.2: ICT Contribution to GDP Growth (All Samples) 62 yi pl Figure 4.1.3: Average GDP Growth- Developed vs Developing 63 ua al Figure 4.1.4: ICT Contribtion To GDP Growth Developed vs Developinng 64 n Figure 4.1.5: ICT Contribute to 100% of Overall Output Growth 2005-2010 65 va Figure 4.1.6: Shares in Contribution of ICT vs non-ICT Capital Input to Growth 66 n ll fu oi m LISTS OF TABLES nh at Table 2.3-1: Contribution of ICT Capital on Economic Growth 26 z Table 2.3-2: Contributions from non-ICT sector to Aggregate MFP growth 32 z ht vb Table 3.1-1: ICT’s Investment to spending ratio 41 jm Table 3.1-2: Data sources for Capital Services Calculation 46 k Table 3.2-1: Proxy and expectation sign for each determinants of ICT contribute to Growth 58 gm Table 3.2-2: Data sources of determinants of ICT contribute to Economic Growth 58 l.c Table 4.2-1: ICT is Capital Input Contribute to Economy Output 67 om Table 4.2-2: Specific Tests for ICT is Capital Input Contribute to Economy Output 68 an Lu Table 4.2-3: Spillovers Effects of ICT Investment on TFP Growth 72 Table 4.3-1: Determinants of Variations of ICT Contribution to Economic Growth 75 n va Table B-1: ICT contribution to economic growth – results of growth accounting method 99 ey t re CHAPTER I t to ng hi INTRODUCTION ep Problem Statement 1.1 w The concept of Information and Communication Technology (ICT) had been used n lo since 1980s by many academic researchers Since then, ICT has become an interest ad topic and attracts researchers in many different fields The reason is because ICT y th ju has many characteristics that make it particularly attractive in the whole yi development strategy pl ua al At first, it is a useful channel of communication that would overcome the n geographical distance In any place, you can access information from anywhere va n else Through ICT, almost every kind of knowledge can be transmitted between fu ll countries and regions all around the world So with ICT, different countries have m oi greater opportunity to interact with each other to improve themselves in cultures, at nh politics and other features of society Especially, developing countries have the z ability to increase their knowledge, productivity and new introductions of modern z vb technologies Moreover, this capability increases continuously due to advance jm ht developments in ICT products including radio, satellite, networking and data k processing gm l.c Second, ICT has applications in many different areas that significant impact on the ways of education, learning, production, health, economic manipulations… Remote om or distance education and health are among such of those benefits from ICT an Lu applications Moreover, in discussion about role of ICT in learning and education in ey richer, more immediate, world-relevant educational resources and opportunities” t re pivotal force that brings the changing in learning is the use of ICT “which provides n Technology in Schools, 2008-2013”, Minister Mary Hanafin emphasized that a va her report of “Investing Effectively in Information and Communications