ABSTRACT
One of the routes by which investments in information and communication technologies (ICT) could impact a macroeconomic bottom line of economies is by contributing to total factor productivity (TFP), an important component of economic growth. While the more traditional “investments to revenues” resource-intensive path has been well researched, the nature of the indirect “investments to TFP” link remains much less clear. Specifically, it is not well understood what conditions must be present for economies to exhibit the relationship between investments and TFP. In the current study, conducted in the context of 18 transition economies in Europe and the former Soviet Union, we aim to identify some of the factors associated with the presence of the relationship between the subset of investments in ICT, investments in telecoms, and two components of TFP, change in efficiency and change in technology. The results of the analysis of the data set spanning from 1993 to 2002 suggest that while the presence of the link between investments and change in technology was associated with the level of investments, the presence of the relationship between investments and change in efficiency was associated with the quality of a full-time telecom workforce. The consequent analysis of the data set spanning from 2003 to 2008 supports this finding and also provides evidence of the importance of the macroeconomic strategies that balance an increase in the levels of investments with the increase in the levels of efficiency of utilization of investments and the generation of revenues.
