The Evolving Role of ICT in the Economy

6 June 2018

Dr Mirko Draca

Today, Huawei together with LSE's Centre for Economic Performance (CEP) launched their collaborative research regarding the impact and power that information and communication technologies (ICT) have on the economy and society, at the fourth Huawei Asia-Pacific Innovation Day on 6 June in Bangkok.

The study covers the topics of the evolving role of ICT in the economy; technological influence of ICT as a generator of ‘knowledge spillovers’; an analysis of the history of broadband diffusion in the data-rich setting of the United Kingdom which can also serve as a proxy for other advanced economies; and a discussion of recent employment trends and the challenge of automation.

Dr Mirko Draca, Senior Research Associate at CEP and Associate Professor at Warwick University, shared details about this compelling research at the event.

The research suggests that the current productivity slow-down is most likely due to an implementation lag. Just as the 1990s productivity surge was preceded by multiple decades of investments by companies and governments in physical and human capital related to ICT, the same process is likely to repeat itself with a new generation of technologies. In 10-15 years’ time we will begin to fully experience the productivity benefits of 5G, the Cloud, IoT, big data and AI/automation.

In a key section, the report also finds that the ICTs generate on average much larger ‘knowledge spillovers’ than those generated by other technologies. These knowledge spillovers are measured via an in-depth analysis of international patent citations that takes account of the full network of citations related to individual patents. The large knowledge spillovers associated with ICT hold even when ICT is compared to other exciting frontier technologies such as biotech and clean energy. For example, wireless technologies generate on average more than 50% higher knowledge spillovers than other types of technology.

Finally, the report’s research on labour market trends in the 2000s and 2010s finds no conclusive evidence that employment or wages are changing in line with a new wave of automation hitting the high-skill jobs previously shielded from the effects of technology. Moreover, the data suggests that recessions and their aftermath are far more influential in driving structural changes in employment. That is, the first credible evidence of a new wave of automation hitting the labour market is unlikely to emerge until the next cyclical downturn in economic activity.

Read more about the report and download the PDF.