ICT contribution to economic performance in Belgium: preliminary evidence [ Working Paper 07-02 - 22/07/2002]

In this paper, the impact of ICT on economic and productivity growth is investigated in the context of the Belgian economy. The analysis is conducted at aggregate and branch level. The impact of ICT on economic growth through productivity gains can be transmitted via three different channels, namely increase in the ICT capital available per worker (capital deepening), technical progress in the ICT producer sectors (TFP growth) and finally, technical progress in the ICT user sectors through spillover effects (TFP growth).

At a macroeconomic level, the empirical evidence indicates that ICT explain more than half of the productivity growth acceleration in the United States. In Europe, the impact seems weaker, due both to a less developed ICT producer sector and to a slower diffusion of ICT in the economy. The conclusions for Europe apply for Belgium as well. Nevertheless, the average annual growth contribution of ICT capital accelerated between the first and second half of the 1990s, from 0.28% to 0.36%. This evolution puts Belgium slightly above the average of the European Union.

At sector level, the analysis attempts to establish links between the evolution of productivity and the diffusion of ICT among the different economic sectors. This analysis leads to further investigation of the apparent trade-off between productivity and employment observable in Belgium and the role played by ICT investment. Several sectors appear to have carried out important ICT investment as early as 1995. Sharp productivity growth is observed for all these branches but in terms of job creation, performance has been more heterogeneous.

A detailed study of the Belgian sectors leads to the same conclusion as the one reached for other countries: ICT producer sectors account for the main part of the overall productivity acceleration while they are also job creators. The behaviour of the sectors that intensively use ICT is not so clear cut. Some ICT using service sectors have recorded both productivity and employment growth while the manufacturing industries have recorded an increase in productivity and a strong decline in employment. In the first case, spillover effects of ICT on TFP could prevail while in the second case capital deepening could be the dominant effect.