Measuring ‘indirect’ investments in ICT in OECD countries

ABSTRACT

ICT components, such as microprocessors, may be embodied in other capital goods not recorded as ICT in National Accounts. We name ‘indirect ICT investment’ the value of embodied ICT components in non-ICT investment. The paper provides estimates of ‘indirect ICT investment’ based on detailed and unpublished Supply-Use tables (SUT) in 12 OECD countries: Australia, Belgium, Canada, Chile, Czech Republic, Denmark, France, Germany, Japan, Israel, Mexico, New Zealand, the United Kingdom, and the United States.

Our main finding is that ICT investment appears significantly higher when considering its indirect component, the average increase being about 35%. The inclusion of indirect ICT investment, excluding software (for which firms’ expenditures are difficult to measure), changes significantly the relative position of countries with respect to the ICT intensity of their investments. The inclusion of software further increases indirect ICT investment but the increase is smaller (in percentage) than without this inclusion. A final result, but concerning only three countries, it that the diagnosis of a stabilisation, or even a decrease, of ICT investment in percentage of GDP or of total investment, observed from the beginning of the century, is not modified if we take into account the indirect ICT investment.

KEYWORDS:

• Investment
• ICT
• technology

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Gilbert Cette http://orcid.org/0000-0003-3828-913X

Jimmy Lopez http://orcid.org/0000-0002-6671-8280

Notes

1. In perfectly competitive product and input markets, the decrease in the output price equals the increase in multifactor productivity.

2. See for example for the US Jorgenson (2001), Jorgenson, Stiroh, and Ho (2006, 2008) and for international comparisons Schreyer (2000), Colecchia and Schreyer (2001), Pilat and Lee (2001), Van Ark, O'Mahony, and Timmer (2008) and Timmer et al. (2011).

3. See among others Aghion et al. (2009); Cette and Lopez (2012) and Guerrieri, Luciani, and Meliciani (2011).

4. The capital service price is defined as the price for employing or obtaining one unit of capital services over one period of time. A decrease in the capital service price, therefore, reflects higher efficiency of the underlying capital asset.

5. See for example on this point Cette, Clerc, and Bresson (2015).

6. For sake of clarity, the inclusion or exclusion of software refers to indirect ICT investment only. Capitalised software is always included in total investment (GFCF) data, which are drawn from national accounts.

7. This is because world exports of ICT capital goods are concentrated in a few countries with a strong comparative advantage in the production of ICTs.