• Corpus ID: 54601362

Contribution of ICT to economic growth Italy

@inproceedings{Santarelli2011ContributionOI,
  title={Contribution of ICT to economic growth Italy},
  author={Elisabetta Santarelli},
  year={2011}
}

• E. Santarelli
• Published 2011
• Economics

The spread of new information and communication tec hnologies in enterprises has led to a profound transformation of the Italian production system, im pacting efficiency and innovative capacity. The aim of this work is to evaluate the impact on t he national economy of investment in ICT by analysing production and demand multipliers calcula ted using input-output matrices released by ISTAT for the years 1995, 2000, 2005. The results s how that ICT has a greater multiplicative effect on the productive system than non-ICT sectors and, thus, is a key sector for economic growth. The content of this work reflects only the opinions of the authors, and not necessarily that of the Mi nistry. Contribution of ICT to economic growth in Italy DI CARLO Claudio SANTARELLI Elisabetta 3 Introduction and aims of the work Information and communication technologies (ICT) ar e n integral part of the social fabric of developed economies, to an extent that a modern society without ICT would be unthinkable. ICT produces profound and rapid changes in advanced e onomies. ICT is changing types of goods and services, production methods and systems, produ cti n locations, infrastructure and business organization. ICT goods and services are used by ci tizens for daily life (work, study, communication), by government offices to provide pr ompt and inexpensive services (e.g. health services, registry services, etc.), and by enterpri ses n productive activities. As regards these changes, economic studies mainly f ocus on ICT as a process of innovation and its impact on economic productivity. ICT makes producti on processes more efficient and also offers a wide range of product innovations. New ICT goods an d services create new demands, new markets and new sectors of production. In particular, this new demand is driving change in the structure of modern economies. Suffice it to say that factories producing computers, mobile phones, ipods or Internet service providers did not exist 15 or 20 y ears ago. According to the latest ISTAT data, the spread of b asic information technology in industry and services is close to saturation. In 2009, 96.2% of enterprises with at least 10 employees used computers and 93.9% had an Internet connection. App roximately 86.3% of companies use the Internet to access online banking and financial ser vic s, about 60% have their own website (Istat 2009). In general, between 2004 and 2009 major core technologies were increasingly used by Italian companies: this spread of ICT in enterprise s triggers a virtuous circle of economic growth. Growth of demand in the ICT sector stimulates the g rowth of all other sectors of the economy. Since the production of ICT goods and services requ i s input from non-ICT sectors, greater ICT demand triggers increased production in non-ICT sec tors. For example, the production of computer requires both ICT and non-ICT components, such as p l tic, metal and glass. Moreover, the factories that make computers use financial and com mercial services and need new offices and, in general, new locations. Similarly, the marketing of c mputers requires trade and transport services. Thus, the final demand for computers not only stimu lates ICT sector production, directly involved in production, but also a wide range of traditional on-ICT sectors. There is another way which ICT stimulates the growth of non-ICT sectors. In fact, the ICT sector provides goods and services not only to consumers – there are electronic components in most domestic appliances (e.g. TVs, dishwashers, etc) but also to companies, since IC T goods and services are used as intermediate inputs in the production of a variety of non-ICT go ods and services. Consider, for example, electronically controlled manufacturing processes i n industrial machinery or telecommunications services used for business transactions and exchang es. Contribution of ICT to economic growth in Italy DI CARLO Claudio SANTARELLI Elisabetta 4 The automotive industry is a clear example of the c anges made possible by ICT in the productive system. Electronic components have replaced traditi onal mechanical components and built-in software offer modern functions such as entertainme nt, navigation and air conditioning. All this would not be possible without the new opportunities offered by ICT. Therefore it is clear that ICT is an economic multiplier triggering a virtuous circle which generates and fuels development and growth. During the 1990s investments in ICT increased consi derably (more than non-ICT investment) boosting the new economy within the framework of national investment (Iamma rino et al. 2001). According to the latest Eurostat data, the percenta ge of GDP spending on information technology (IT) was 1.4% in 2009 and 1.5% in 2006. The analogo us figure for telecommunications (TLC) was 2.7% in 2009 and 2.6% in 2006 (Eurostat 2010). In 4 years, total expenditure on ICT remained almost unchanged. According to the latest surveys c onducted by ASSINFORM (National Association of Technology Producers and Services fo r Inf rmation and Communication 2010), the Italian market declined in the first half of 2010 c ompared to the same period in 2009, -2.5% for IT and -2.3% for TLC, mostly because of the economic c risis. The decline, however, was lower than that of 2009 compared to 2008, indicating that many firms, despite the crisis, are starting to renew business technologies, with greater computerization and investment in new infrastructure (Assinform 2010). Although the evidence is not uneq uivocal, most studies show that ICT has not only been particularly strong as a sector of knowle dge-intensive industry but also shown a remarkable capacity to contribute to the growth of other sectors, both technology intensive and traditional (Iammarino et al. 2001). In this paper, we aim to assess the impact on the e ntire national economic system of increased investment in ICT in Italy. For this purpose, appro priate indicators are calculated using InputOutput tables (I-O tables) of the Italian economy f or 1995, 2000, 2005 released by ISTAT. Input Output matrix theory An I-O table shows how the output and input of a si ngle economic sector (branch) is distributed among the economic sectors of the econo my. Each row of an I-O table shows the distribution of the output of a particular sector b etween intermediate demand and final demand. Intermediate demand means the demand that each sector receives from ot her sectors of the economy and from itself (intra-sectoral demand). Final demand means demand from consumers, government offices, foreign investment, or from oth er sectors such as capital goods. Each column gives the distribution of the inputs of a particul ar economic sector between intermediate inputs and added value. Intermediate i nputs are inputs from branches of the economic Contribution of ICT to economic growth in Italy DI CARLO Claudio SANTARELLI Elisabetta 5 system, while added value is the contribution of pr duction factors (mainly labour and capital) to the output of that sector (Leontief 1941). In gener al, I-O matrices show that the balance of an economic system depends on the structure of the int erdependencies between all sectors of the economy. Table 1: Input-Output Matrix. ECONOMIC SECTORS – INPUT FINAL DEMAND (Consumption + Investment +Exports) TOTAL DEMAND 1 2 ... ... j ... ... N ECONOMIC SECTOR – OUTPUT 1 x11 x12 x1j x1n Z1 X1 2 x21 x22 x2j x2n Z2 X2 ... ... ... ... i xi1 xi2 xij xin Zi Xi ... ... n xn1 xn2 xnj xnn Zn Xn ADDED VALUE Y1 Y2 Yj Yn SUPPLY TOTAL X1 X2 Xj Xn Table 1 shows a standard I-O matrix (Guarini and Ta ssinari 1990). The generic element xij expresses the amount of goods and/or services trade d between sectors i and j. In the rows, xij represents the output of sector i used by sector j. In the columns, xij expresses the input of sector j from sector i. Final demand Zi is the sum of the demand for non-productive sector s of the economy, namely households, government offices, foreign countries; added value Yi is the sum of production factors (capital, labour, social security costs, depreciati on, direct and indirect taxes). An economy imports exports) a part of the goods and services from abro ad: they can be included in the I-O matrix (and usually are), but for the purposes of this work imp orts (exports) are not considered. I-O matrices are characterized by a balance equation in which total demand is equal to total supply : Zi x n