Digital technologies and their impact on industry productivity performance

Dean Parham and Peace Segarajasekeran15 September 2015

BCR’s digital productivity project

>Digitisation everywhere>We know ICTs had productivity-enhancing effects

in the 1990s– jointly with economic reforms

>Where are we now?

BCR’s Digital Productivity Project

>Productivity growth slower – Aust & RoW>Why?– Fewer ICT/digitally based opportunities?– Opportunities not being realised?– Gains being swamped by other factors?– Gains not being measured?

BCR’s Digital Productivity Project

>Primer released>Update growth accounting– Based on ABS national accounts data

>Case studies>Firm-level econometric analysis>Tackle the hard measurement issues

Growth accounting

LABOUR PRODUCTIVITY GROWTH

MFP growth

Capital deepening

Non-ICT capital

deepening

ICT capital deepening

Increasing the ratio of capital to labour

Product & process innovations

ICT• disruptive change• gen purpose tech

Previous work – PC (2004)

Labour productivity growth: 3.2 %paCapital deepening: 1.3 pp

ICT capital deepening 1.0 pp (30%)Hardware 0.6 ppSoftware 0.3 pp

Non-ICT capital deepening 0.4 ppMFP growth 1.8 pp

Over 1993-94 to 1998-99

Estimates not for quotation

Broad trends: net capital stocks

Jan-1980

Jan-1982

Jan-1984

Jan-1986

Jan-1988

Jan-1990

Jan-1992

Jan-1994

Jan-1996

Jan-1998

Jan-2000

Jan-2002

Jan-2004

Jan-2006

Jan-2008

Jan-2010

Jan-2012

Jan-2014

0

10000

20000

30000

40000

50000

60000

70000

Hardware

Software

Electrical & elec-tronic equipment

Entire economy

Jan-1980 Jan-1985 Jan-1990 Jan-1995 Jan-2000 Jan-2005 Jan-20100

100020003000400050006000700080009000

Finance

Jan-1980 Jan-1985 Jan-1990 Jan-1995 Jan-2000 Jan-2005 Jan-20100

100020003000400050006000700080009000

10000

Info, media, tele-coms

Jan-1980 Jan-1985 Jan-1990 Jan-1995 Jan-2000 Jan-2005 Jan-20100

100020003000400050006000700080009000

10000

Wholesale

Jan-1980 Jan-1985 Jan-1990 Jan-1995 Jan-2000 Jan-2005 Jan-20100

2000

4000

6000

8000

10000

Retail

Jan-1980 Jan-1985 Jan-1990 Jan-1995 Jan-2000 Jan-2005 Jan-20100

100020003000400050006000700080009000

10000

Manufacturing

Broad trends

1993-94 to 2003-042003-04 to 2013-14

LP growth (%pa) 3.1 2.1

Capital deepening 1.3 2.2

ICT cap deep yy/2 ??̴

Non-ICT cap deepMFP growth 1.8

-0.1

Estimates not for quotation

Big differences across industries – ICT capital deepening

1990s 2000s

Manufacturing 0.7 0.6Wholesale 1.1 0.9/0.4 (late)Retail 0.6 0.6/0.2 (late)Info, media, comms 1.4 1.0Financial 1.7 1.5/0.7 (late)Prof, scien, tech 0.4 0.4

Estimates not for quotation

A new element: ICT and capital productivityNon-ICT capital productivity growth:Manufacturing:

-23%Wholesale

7% ??Retail

27%Info, media, telecoms 2%Finance

125%

Over 1989-90 to 2013-14

Estimates not for quotation

ICT and capital productivity

Assets:> Land>Buildings>Road vehicles> Inventories

(Very) tentative conclusions

> Growth in use of ICTs has continued in the 2000s> But slowed down after 2007-08

– especially hardware

> Greater use of software in the 2000s> Slower rate of ICT capital deepening on average> Effect of ICTs on productivity of other assets has been

overlooked– high correlation with ICT use in some industries/assets– no improvement in capital productivity in manufacturing