Working Paper, The Economic and Social Research Institute (ESRI), Dublin 184
In this paper we analyse the effects of human capital in fostering output growth in ICT manufacturing and services using data from a sample of twenty OECD countries over the period 1980-2002. We focus on within country between industry differences and control for country and industry specific effects. The results of our econometric analysis suggest that countries with a high human capital stock experienced a faster output growth in ICT producing services and ICT using services. This result is robust when controlling for both the quantity and the quality of the human capital stock as well as country and industry specific effects, the initial income per capita, investment level, labour force growth and the degree of economic openness. Furthermore, we find that the human capital stock and human capital accumulation at country level had a direct positive and significant effect on physical capital investment. Our findings indicate that in developed countries human capital is an important factor driving the output growth of ICT industries, in particular in the services sector. As far as ICT industries are concerned, the improvement in education attainment is however likely to pay off after a long period.