- ICT has driven productivity and growth in developed countries over the past
- Investment in ICT generates a bigger return to productivity growth than
most other forms of capital investment. This “ICT Dividend” is estimated to
contribute one-third of the overall annualised returns on ICT investment of 20%
- The “ICT Dividend” is dependent on accompanying investments in intangible
capital (which includes organisational restructuring and employee know-how) and
the local policy and regulatory framework.
- Europe has fallen behind the world leader in investment in ICT— the
US—since 1991. The US increased ICT investment as a proportion of GDP from 9%
in 1991 to 30% in 2010. Europe’s ICT capital stock increased from 6-9% (near
parity with the US) to 23% (approximately 25% behind the US) over the same
- The ICT investment disparity significantly affected Europe’s relative
productivity. From 2000-2010, annual US productivity growth accelerated to
close to 2%. In Europe, annual productivity growth decelerated to around 1% –
half the US level.
- Had Europe matched the US in its productivity growth since the mid-1990s,
the gap in living standards would have closed by 25% by 2011, equivalent to an
improvement in Europe’s GDP per head of just under €3,400. (Europe would close
the gap fully by 2050).
- The European productivity leaders are Scandinavia and the UK, which have
invested most in ICT and have market conditions favourable to exploit it. Over
the past 15 years, they have seen average labour productivity growth of between
1.7% and 2% a year.
- Italy and Spain have made least effective use in Europe of ICT to drive
productivity. Since 1995, annual labour productivity growth has averaged only
0.3% and 0.8% for Italy and Spain, respectively.
- By raising its ICT investment, Europe could see significant economic growth
and an “ICT Dividend” from accompanying productivity growth. If by 2020 Europe
built its ICT capital stock to the same relative level as the US, EU GDP would
increase by 5%, equivalent to about €760 billion at today’s prices, or around
€1,500 per person. For some countries experiencing sluggish growth—such as
Spain and Italy—the impact on GDP could be over 7%, or €100 and €140 billion,
respectively, at today’s prices.
- Government policy influences the effectiveness of ICT development, returns
on ICT investment and the ability to generate productivity benefits. European
governments would see considerable economic growth by prioritising ICT policy
in their economic plans.
- If Europe does not address its productivity gap, it will not only fail to
catch up with the US but also will risk losing ground to emerging economies.
Twice as many firms in developing economies plan to increase their investments
in productivity-linked technologies by more than 20%.
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