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Matilde Mas & Javier Quesada London, October 26/27th 2004

Matilde Mas & Javier Quesada London, October 26/27th 2004. ICT and Economic Growth in Spain 1985-2002 EUKLEMS Project, Issues for discussion. ICT and Economic Growth in Spain 1985-2002. “ICT and Economic Growth in Spain 1985-2002” STRUCTURE. Data: sources ICT taxonomy of branches

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Matilde Mas & Javier Quesada London, October 26/27th 2004

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  1. Matilde Mas & Javier QuesadaLondon, October 26/27th 2004 • ICT and Economic Growth in Spain 1985-2002 • EUKLEMS Project, Issues for discussion

  2. ICT and Economic Growth in Spain 1985-2002

  3. “ICT and Economic Growth in Spain 1985-2002”STRUCTURE • Data: sources • ICT taxonomy of branches • Branch contribution to output, employment & labour productivity • Capital accumulation • Labour qualification • Growth accounting • Concluding remarks

  4. ICT and Economic Growth in Spain 1985-2002AIM OF THE PAPER • A growth accounting exercise at the industry level • Estimates of the contribution to output & labour productivity of • Labour (hours) • Labour qualification (schooling) • Non-ICT capital • ICT capital • TFP, TFPR

  5. 1.- DATA SOURCES • Output: • National Accounts • GDP: • Excluded: • Rents from dwellings • Incomes from private households with employed persons • Labour: • Nat. Acc.; OECD; Groningen Growth Development Center 60 Industry Database • Hours worked: • (same # hours per worker by branch) • Instituto Nacional de Estadística (INE) Active Population Survey, Wage Structure Survey • Qualification: • 7 levels of schooling: • i) Illiterate; ii) Primary Education; iii) Secondary Ed. (1st level); iv) Secondary Ed. (2nd level); v) Professional Training; vi) Tertiary Ed. (1stlevel); vii) Tertiary Ed. (2nd level).

  6. 1.- DATA SOURCES • Capital services: • New series estimated with the new methodology (OECD 2001) by BBVA Foundation/Ivie • Assets: 18 types • 3 ICT assets: • Hardware • Communications • Software • Branches: reduced from 33 to 29 • No data available on the ICT production sector • We concentrate on ICT using sectors • All rates computed using Törnqvist indexes

  7. 2.- ICT TAXONOMY • Criteria: • Ratio: (ICT capital services)/(Total capital services) • Ratio: (ICT capital services)/(Labour) • Computed for the initial, final and interval average values of the period 1995-2002 • 29 branches grouped into 4 broad clusters: • Non Market Sector (public sector): 3 br. • Other Non-intensive ICT users(non- manufacturing): 5 br. • Intensive ICT users(above average): 8 br. • Non-intensive ICT users (below average): 13 br.

  8. ICT TAXONOMYCharacterization • Intensive ICT users • 31% of total value added; 23% of employment • Higher than average labour productivity levels • Except: Business services, Private Health & Social Services, Other community, social & personal services • Growing weight • Except: Electricity, gas & water supply; Electric, electronic & optic equipment, Financial Intermediation

  9. CONTRIBUTION TO AGGREGATE OUTPUT, EMPLOYMENT & LABOUR PRODUCTIVITY

  10. CONTRIBUTIONS TO AGGREGATE OUTPUT

  11. CONTRIBUTIONS TO EMPLOYMENT

  12. CONTRIBUTIONS TO LABOUR PRODUCTIVITY

  13. CAPITAL ACCUMULATION • Annual rate of non-residential capital accumulation 1985-2002 : 5%. • ICT contribution: 44.2% • Transports & communications: 18.8% a. r. • ICT capitalaccumulation: 11.1% a.r. • ICT group: 66.7% share • Transport & comm., and Financial Intermediation: 39% share • Non-ICT capital accumulation: 3.9%a.r. • Driven by Non-Intensive ICT group ICT SECTOR: THE MOST ACTIVE ONE IN TOTAL & ICT CAPITAL ACCUMULATION

  14. A SYNTHETIC INDEX OF LABOUR QUALIFICATION • Based on the growth rates of employment in each of the 7 levels of education, weighted by their relative wages • Wages as indicators of marginal productivities of labour • A rapid and continuous improvement of the index over the period

  15. GROWTH ACCOUNTING • 1985-2002: meaningful period. Same sub-periods

  16. LABOUR PRODUCTIVITY CHANGE

  17. GROWTH ACCOUNTING RESULTS (1985-2002) • Intensive-ICT group: • the most active one in raising output & productivity (excluding agriculture) • highest ICT-capital contribution to output growth • Electric, electronic & optic equipment • Transports & communications • Financial intermediation • similar contribution to productivity growth of the 3 ICT assets • Highest contribution of the labour quality index • Private health & social services • Financial intermediation • Business services • Negative contribution of TFPR(excluding agriculture) • Intensive-ICTgroup: • Electric, electronic & optic equipment: highest TFPR improvement

  18. GROWTH ACCOUNTING LABOUR PRODUCTIVITY

  19. BRANCH CONTRIBUTION TO OUTPUT (1985-2002)

  20. CONCLUDING REMARKS • Full benefits of ICT using on TFP are not observable as yet in Spain • TFPR • (85-90)1.09%(90-95)0.38%(95-00) -0.03%(00-02)0.04% • There is more positive evidence in raising output & labour productivity • There is a slow down of labour productivity in the second part of the 90’s & a slight pick up in 2000-2002 • (85-90)1.67%(90-95)1.53%(95-00) 0.48%(00-02)0.71% • Main engines of output growth (in different intensities): • (ICT & Non-ICT) capital accumulation • Employment • Labour qualification

  21. CONCLUDING REMARKS 4.(1985-1990) - Best records in output, employment, capital accumulation, TFPR improvements and labour qualification 5.(1990-1995) - Crisis: Output growth reduced by 4 pp, destruction of employment, slow down of productivity gains & of TFPR improvements. 6. (1995-2000) - Strong recovery. Main drivers: strong employment creation; strong labour qualification; slow pace of labour productivity gains (deceleration of Non-ICT capital accumulation and poor behaviour of TFPR) 7. (2000-2002) - Continuous recovery. Slight productivity pick-up; slower employment growth; more gradual improvements in labour qualification. Strong ICT capital performance

  22. CONCLUDING REMARKS 8. The evidence of a recent productivity pick-up is more likely when Non-market sector, Agriculture& fishing and Forestry sectors are excluded 9. Intensive ICT sectors are the most dynamic ones in terms of output, employment, capital deepening –ICT in particular- and labour qualification

  23. EUKLEMS PROJECTISSUES FOR DISCUSSION • METHODOLOGICAL  • Rates of return: Endogenous vs Exogenous • Growth rates computation 2. STATISTICAL • Treatment of land in capital estimates (excluded in Spanish estimates) • II.2. Residential stock excluded for productivity analysis • Dwelling rents estimates • Income from households with employed persons • Disaggregation by schooling levels. (How many?)

  24. 1.1. RATES OF RETURN: EXOGENOUS VS. ENDOGENOUS • A practical issue: How to deal with public goods like infrastructures? • According to the Nat. Acc., the contribution of Government Owned Assets to Aggregate Gross Operating Surplus is zero. • If one recognizes that some forms of public capital –like infrastructures- contribute positively to output generation, the NA output figures should be augmented according to the capital services they provide. Question: How to value public capital services? A tentative answer: Use the exogenous approach Advantage: no need to assume competitive markets or Constant Returns to Scale Growth accounting implementation:use the cost version instead of the income version. Accordingly,

  25. 1.1. RATES OF RETURN: EXOGENOUS VS. ENDOGENOUSCost approach to labour productivity measure

  26. 1.1. RATES OF RETURN: EXOGENOUS VS. ENDOGENOUSChoosing exogenous rates • In most cases, Public Capital is included in the “Other Constructions” item (without an explicit mention) • Thus, the usual endogenous rate computation includes Public Capital on the input side, but excludes its contribution from the income side. • Consequently, is the endogenous rate underestimated? Question: How to deal with capital services as provided by Government Assets when the endogenous approach is adopted?

  27. 1.2. GROWTH RATES COMPUTATION • It is commonly accepted that growth rates of capital services should be computed as a Törnqvist index Question: Should growth rates for all variables be computed as Törnqvist indexes? A tentative answer: provided in the annex to the document, more specifically,

  28. 1.2. GROWTH RATES COMPUTATION

  29. 2. STATISTICAL ISSUES • Land treatment • Spain excludes land rent from estimates of real estate capital • The exclusion of Residential housing from productive capital stock measures obliges to • Exclude dwelling rents estimates • Income from households with employed persons • Disaggregation by levels of schooling

  30. 2. STATISTICAL ISSUES • Disaggregation by levels of schooling. How many levels?

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