ICT and Economic Growth in EU: A macro Level Comparison of Estimated ICT Output Elasticities

ABSTRACT This paper examines the impact of information and communication technology (ICT) investments on the economic growth of EU-27. Our work responds to the lack of sufficient number of econometric estimation studies at country level coupled with a large variation in ICT elasticity results. We estimate an augmented Cobb Douglas production function using panel data techniques based on a sample of 27 countries for the period 1996–2016. The results suggest a significant effect of ICT investments on GDP growth. Further comparisons are drawn with studies using similar databases and sample periods. The results also reveal that the estimated returns to ICT are three times higher than the ICT factor share. Having excluded several sources of potential excess returns, we conclude that omitted variables and possible complementarities between ICT and organizational capital could serve as a plausible explanation.