The impact of IT on economic growth: evidence from an empirical cross-country investigation

Evaluating the sources of economic growth is obviously important, and numerous attempts have been made to judge the impact of many different factors on economic growth. Since some empirical studies have reported that information technology (IT) is one of the important factors in economic growth, this paper empirically explores the impacts of IT investment on economic growth using a cross-country analysis based on data from 86 countries for the year 1970-1998. To this end, a further augmented version of the neoclassical Solow growth model, explicitly including IT investment, is applied. Subject to the appropriate caveats, the results provide further support for several key conclusions of the former studies - investment in physical capital, population growth, and the human capital are important in accounting for economic growth across countries. More importantly, it is concluded that IT investment significantly contributes to economic growth. In addition, the main finding is that the implied return to IT investment is very high between the sample countries.