ICT and productivity growth in the United Kingdom

This paper develops new estimates of investment in and output of information and communication technology (ICT). These new estimates imply that GDP growth has been significantly understated, particularly since 1994. A growth‐accounting approach is employed to measure the contribution of ICT to the growth of both aggregate output and aggregate input. On both counts, the contribution of ICT has been rising over time. From 1989 to 1998, ICT output contributed a fifth of overall GDP growth. Since 1989, 55 per cent of capital deepening (the growth of capital per hour worked) has been contributed by ICT capital; since 1994 this proportion has risen to 90 per cent. ICT capital deepening accounts for 25 per cent of the growth of labour productivity over 1989–98 and 48 per cent over 1994–8. But even when output growth is adjusted for the new ICT estimates, both labour productivity and TFP growth are still found to slow down after 1994