|Type of paper:||Essay|
|Categories:||Economics Finance Information technologies|
Productivity growth provides foundations for making improvements in an individual's standards of living. According to the economic growth theories, investment in Information and Communication Technology (ICT) is what drives economic growth. Generally, ICT has resulted in the economic growth of all the countries including the developing ones as it has great promises of reducing poverty and increasing economic growth. The information is evident in the following figure.
Over the past decades, there have been countless diffusion in ICT which has resulted in transforming the world to the information society. Through ICT infrastructure, there has been the introduction of the internet, mobile phones, fixed-line telephones, and broadbands which enables firms, government, and people to access knowledge and information better with regards to speed, scope, and scale. ICT has also enhanced the distribution of resources in government and societies, and this has reduced the cost of production and promoted higher investment and demand in different economic sectors.
ICT investment in selected OECD nations
The main drivers of economic growth in countries include internet usage, broadband adoption, and mobile phones. On the other hand, the fixed telephone does not drive economic growth since most of the organizations are not currently using the strategy as it does not enhance telecommunication technology growth. Some of the reasons why it is not a driver include the fact that it is costly to afford the infrastructure cost needed in installing and diffusing telephone lines in all the boundaries. Also, mobile phones can act as substitutes of fixed telephones in most of the developing nations. Mobile phones have an essential positive impact on developing and developed nations economic growth. Most of the nations and organizations have currently adopted ICT to carry out their daily activities and even communicating which eases most of the operations thus resulting in economic growth.
ICT has enhanced capital deepening. Making several investments in the field of ICT makes contributions to capital deepening and further assist in raising labor productivity. Even though the ICT capabilities and qualities have improved in the previous years, ICTs nominal prices have been seen to decrease. Therefore, these developments have resulted in declines in prices encouraging the downstream segments to raise their capital spending that further results in the capital are deepening. The decrease in the prices of ICT and capital deepening has resulted in labor growth productivity which influences the economy positively.
ICT's sector technical progress has contributed to rapid multifactor productivity growth. For the past years, there have been several signs of progress which have been made in the manufacture of ICT services and goods. Also, the qualities of the goods have highly been improved resulting in an increased number of customers. Manufacturing of ICT services and goods due to technological progress can contribute to an increase in the production sector. The factors of production can be used in increasing the type and amount of labor utilized in production. Furthermore, the factors result in increased efficiency which directly affects economic growth and specifically through rapid multifactor productivity. Higher use of ICT help firms in enhancing efficiency which raises MFP. Great use of ICT can also contribute to the effects of networks through more innovations and lowering transaction costs that improves the overall efficiency of the economy. Therefore, ICT plays an essential role in economic growth. Unfortunately, it is not the only thing that drives economic growth.
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