Information and communications technology (ICT), productivity and economic growth in China

Chee Wong

Research output: ThesisDoctoral Thesis

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Abstract

In the current literature on productivity and economic growth, many studies have explored the relationship between information and communications technology (ICT) and growth. In these studies, ICT capital stock is treated as an individual input in the production process that contributes to output growth. In fact, ICT is found to be a key driver of productivity growth in the developed economies. However, few empirical studies deal with China which has in recent years become one of the world's largest ICT markets and production centres. The lack of empirical work in this field contrasts sharply with the wealth of literature which presents background and descriptive studies of China's high technology sectors that include the telecommunications, the computer and the Internet sectors. This dissertation attempts to fill the void in the literature by examining the role of ICT in China's economy over the past two decades. It aims to develop a framework which emphasizes ICT as a production factor and apply it to interpret China's economic growth. The dissertation contributes to the empirical literature by focusing on the following core aspects underlying the linkage between ICT and economic growth. First, it attempts to estimate the size of China's ICT capital stock using the perpetual inventory method. Second, based on such estimates, the dissertation measures the contribution of ICT to China's economic growth by means of a production function model that segregates ICT from all other forms of capital. Third, the dissertation examines the impact of ICT on technical efficiency in China's regions by applying a stochastic frontier model. Lastly, the dissertation looks at the demand aspect of the ICT industry by estimating and projecting demand for ICT services, namely, the telecommunications and computer markets in China. According to this study, ICT capital is found to be a positive driver for the Chinese economy, and is responsible for about 25% of the country's economic growth, although the percentage varies at different periods. ICT capital is also found to have a positive and significant impact on technical efficiency in the Chinese regions. However, the disparity between the coastal and inland regions in terms of technical efficiency scores is found to be very wide, due to the bulk of ICT investment going into the municipal cities and coastal provinces. It is also found that China may be facing the beginning of a period of strong productivity growth driven by increased investment in ICT, especially innovative investment. Furthermore, projections of demand show that the majority of Chinese citizens will have access to a fixed-line telephone or the mobile phone in five years from now, while about half of the Chinese population is expected to use the computer by 2010.
Original languageEnglish
QualificationDoctor of Philosophy
Publication statusUnpublished - 2007

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